Increasing evidence suggests that mutations in the nucleocapsid (N) protein of severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) may enhance viral replication by modulating the assembly process. However, the mechanisms governing the selective packaging of viral genomic RNA by the N protein, along with the assembly and budding processes, remain poorly understood. Utilizing a virus-like particles (VLPs) system, we have identified that the C-terminal domain (CTD) of the N protein is essential for its interaction with the membrane (M) protein during budding, crucial for binding and packaging genomic RNA. Notably, the isolated CTD lacks M protein interaction capacity and budding ability. Yet, upon fusion with the N-terminal domain (NTD) or the linker region (LKR), the resulting NTD/CTD and LKR/CTD acquire RNA-dependent interactions with the M protein and acquire budding capabilities. Furthermore, the presence of the C-tail is vital for efficient genomic RNA encapsidation by the N protein, possibly regulated by interactions with the M protein. Remarkably, the NTD of the N protein appears dispensable for virus particle assembly, offering the virus adaptive advantages. The emergence of N* (NΔN209) in the SARS-CoV-2 B.1.1 lineage corroborates our findings and hints at the potential evolution of a more streamlined N protein by the SARS-CoV-2 virus to facilitate the assembly process. Comparable observations have been noted with the N proteins of SARS-CoV and HCoV-OC43 viruses. In essence, these findings propose that β-coronaviruses may augment their replication by fine-tuning the assembly process.IMPORTANCEAs a highly transmissible zoonotic virus, severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) continues to evolve. Adaptive mutations in the nucleocapsid (N) protein highlight the critical role of N protein-based assembly in the virus's replication and evolutionary dynamics. However, the precise molecular mechanisms of N protein-mediated viral assembly remain inadequately understood. Our study elucidates the intricate interactions between the N protein, membrane (M) protein, and genomic RNA, revealing a C-terminal domain (CTD)-based assembly mechanism common among β-coronaviruses. The appearance of the N* variant within the SARS-CoV-2 B.1.1 lineage supports our conclusion that the N-terminal domain (NTD) of the N protein is not essential for viral assembly. This work not only enhances our understanding of coronavirus assembly mechanisms but also provides new insights for developing antiviral drugs targeting these conserved processes.