SARS-CoV-2 infection triggers a strong antibody response toward nucleocapsid protein (NP), suggesting its extracellular presence beyond intravirion RNA binding. Our co-culture experiments show NP decorates infected and proximal uninfected cell surfaces. We propose a mechanism whereby extracellular NP on uninfected cells contributes to COVID-19 pathogenicity. We show that NP binds to cell-surface sulfated glycosaminoglycans using its RNA-binding sites, facilitated by the flexible, positively charged linker. Coating uninfected lung-derived cells with NP attracted anti-NP IgG from lung fluids and sera of COVID-19 patients. Immune recognition was significantly higher in moderate versus mild COVID-19. Binding of anti-NP IgG in sera generated clusters, triggering C3b deposition via the classical complement pathway on SARS-CoV-2 non-susceptible cells co-cultured with infected cells. The heparin analog enoxaparin outcompeted NP binding, rescuing cells from anti-NP IgG-mediated complement deposition. Our findings reveal how extracellular NP may exacerbate COVID-19 damage and suggest preventative therapy avenues.