The nucleocapsid protein (N) of SARS-CoV-2 is essential for virus replication, genome packaging, evading host immunity, and virus maturation. N is a multidomain protein composed of an independently folded monomeric N-terminal domain that is the primary site for RNA binding and a dimeric C-terminal domain that is essential for efficient phase separation and condensate formation with RNA. The domains are separated by a disordered Ser/Arg-rich region preceding a self-associating Leu-rich helix. Phosphorylation in the Ser/Arg region in infected cells decreases the viscosity of N:RNA condensates promoting viral replication and host immune evasion. The molecular level effect of phosphorylation, however, is missing from our current understanding. Using NMR spectroscopy and analytical ultracentrifugation, we show that phosphorylation destabilizes the self-associating Leu-rich helix 30 amino-acids distant from the phosphorylation site. NMR and gel shift assays demonstrate that RNA binding by the linker is dampened by phosphorylation, whereas RNA binding to the full-length protein is not significantly affected presumably due to retained strong interactions with the primary RNA-binding domain. Introducing a switchable self-associating domain to replace the Leu-rich helix confirms the importance of linker self-association to droplet formation and suggests that phosphorylation not only increases solubility of the positively charged elongated Ser/Arg region as observed in other RNA-binding proteins but can also inhibit self-association of the Leu-rich helix. These data highlight the effect of phosphorylation both at local sites and at a distant self-associating hydrophobic helix in regulating liquid–liquid phase separation of the entire protein.