Severe acute respiratory syndrome coronavirus nsp1 protein suppresses host gene expression, including type I interferon production, by promoting host mRNA degradation and inhibiting host translation, in infected cells. We present evidence that nsp1 uses a novel, two-pronged strategy to inhibit host translation and gene expression. Nsp1 bound to the 40S ribosomal subunit and inactivated the translational activity of the 40S subunits. Furthermore, the nsp1-40S ribosome complex induced the modification of the 5' region of capped mRNA template and rendered the template RNA translationally incompetent. Nsp1 also induced RNA cleavage in templates carrying the internal ribosome entry site (IRES) from encephalomyocarditis virus, but not in those carrying IRES elements from hepatitis C or cricket paralysis viruses, demonstrating that the nsp1-induced RNA modification was template-dependent. We speculate that the mRNAs that underwent the nsp1-mediated modification are marked for rapid turnover by the host RNA degradation machinery.