The global public health has been severely damaged by the current pandemic of COVID-19, which is caused by SARS-CoV-2. The SARS-CoV-2 genome consists of four essential structural proteins: Spike (S), Membrane (M), Envelope (E), and Nucleocapsid (N) proteins. Among the structural proteins, N is the viral major RNA-binding protein which recognizes and binds to the specific sequence in the viral RNA genome, designated packaging signal (PS) to trigger the initiation of viral genome packaging. However, the molecular detail of N protein with PS interaction and the consensus PS sequence in the SARS-CoV-2 genome remains elusive. This study aims at development of a bacteria-based inhibition assay for measuring the interaction of N protein with viral RNA fragments to identify PS from the SARS-CoV-2 genome. Initially, we conducted an unbiased bioinformatic analysis based on the conservation in both RNA sequence and secondary structure, and predicted three highly possible packaging signal candidates (PSCs), referred to as PSC1, PSC2, and PSC3, within nucleotides 20,080 to 21,171 in the SARS-CoV-2 genome. These PSC cDNAs were fused with the downstream luciferase gene and introduced together with the N protein expression plasmid into the Lemo21 (DE3) Escherichia coli system. We extensively performed optimization of the bacteria-based inhibition system and assessed the N–PS interaction via the translational suppression of luciferase expression. The results showed over 70% inhibition of luciferase expression for PSC1 and PSC2 with both N proteins from SARS-CoV-1 and SARS-CoV-2, supporting our bioinformatic prediction, suggesting a good candidate for further study of the specific N–PS interaction and the viral genome packaging. Our findings could be useful for further study of viral genome packaging and the development of new antiviral drug targeting N protein to fight future COVID-19 pandemic. Additionally, our bacteria-based inhibition assay provides a framework for further elucidating the other RNA–protein interactions.