The molecular events associated with the transcriptive and replicative cycle of negative-stranded RNA viruses are still an enigma. We took Chandipura virus, a member of the Rhabdoviridae family, as our model system to demonstrate that Phosphoprotein P, besides Nucleocapsid protein N, also acts as a leader RNA-binding protein in its unphosphorylated form, whereas CKII-mediated phosphorylation totally abrogates its RNA-binding ability. However, interaction between P protein and leader RNA can be distinguished from N-mediated encapsidation of viral sequences. Furthermore, P protein bound to leader chain can successively recruit N protein on RNA while itself being replaced. We also observed that the accumulation of phosphorylation null mutant of P protein in cells results in enhanced genome RNA replication with concurrent increase in the viral yield. All these results led us to propose a model explaining viral transcription-replication switch where Phosphoprotein P acts as a modulator of genome transcription and replication by its ability to bind to the nascent leader RNA in its unphosphorylated form, promoting read-through of the transcription termination signals and initiating nucleocapsid assembly on the nascent RNA chain. © 2003 Elsevier Science (USA). All rights reserved.