Alphavirus budding from the plasma membrane occurs through the specific interaction of the nucleocapsid core with the cytoplasmic domain of the E2 glycoprotein (cdE2). Structural studies of the Sindbis virus capsid protein (CP) have suggested that these critical interactions are mediated by the binding of cdE2 into a hydrophobic pocket in the CP. Several molecular genetic studies have implicated amino acids Y400 and L402 in cdE2 as important for the budding of alphaviruses. In this study, we characterized the role of cdE2 residues in structural polyprotein processing, glycoprotein transport, and capsid interactions. Along with hydrophobic residues, charged residues in the N terminus of cdE2 were critical for the effective interaction of cores with cdE2, a process required for virus budding. Mutations in the C-terminal signal sequence region of cdE2 affected E2 protein transport to the plasma membrane, while nonbudding mutants that were defective in cdE2-CP interaction accumulated E2 on the plasma membrane. The interaction of cdE2 with cytoplasmic cores purified from infected cells and in vitro-assembled core-like particles suggests that cdE2 interacts with assembled cores to mediate budding. We hypothesize that these cdE2 interactions induce a change in the organization of the nucleocapsid core upon binding leading to particle budding and priming of the nucleocapsid cores for disassembly that is required for virus infection.