Severe acute respiratory syndrome (SARS), which is caused by a novel coronavirus (CoV), is a highly communicable disease with the lungs as the major pathological target. Although SARS likely stems from overexuberant host inflammatory responses, the exact mechanism leading to the detrimental outcome in patients remains unknown. Pulmonary macrophages (Mphi), airway epithelium, and dendritic cells (DC) are key cellular elements of the host innate defenses against respiratory infections. While pulmonary Mphi are situated at the luminal epithelial surface, DC reside abundantly underneath the epithelium. Such strategic locations of these cells within the airways make it relevant to investigate their likely impact on SARS pathogenesis subsequent to their interaction with infected lung epithelial cells. To study this, we established highly polarized human lung epithelial Calu-3 cells by using the Transwell culture system. Here we report that supernatants harvested from the apical and basolateral domains of infected Calu-3 cells are potent in modulating the intrinsic functions of Mphi and DC, respectively. They prompted the production of cytokines by both Mphi and DC and selectively induced CD40 and CD86 expression only on DC. However, they compromised the abilities of the DC and Mphi in priming naïve T cells and phagocytosis, respectively. We also identified interleukin-6 (IL-6) and IL-8 as key SARS-CoV-induced epithelial cytokines capable of inhibiting the T-cell-priming ability of DC. Taken together, our results provide insights into the molecular and cellular bases of the host antiviral innate immunity within the lungs that eventually lead to an exacerbated inflammatory cascades and severe tissue damage in SARS patients.