The coronavirus papain-like protease (PLpro) plays an important role in the proteolytic processing of viral polyproteins and the dysregulation of the host immune response, providing a promising therapeutic target. However, the development of inhibitors against severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) PLpro is challenging owing to the restricted S1/S2 sites in the substrate binding pocket. Here we report the discovery of two activators of SARS-CoV-2 PLpro and the identification of the unique residue, cysteine 270 (C270), as an allosteric and covalent regulatory site for the activators. This site is also specifically modified by glutathione, resulting in protease activation. Furthermore, a compound was found to allosterically inhibit the protease activity by covalent binding to C270. Together, these results elucidate an unrevealed molecular mechanism for allosteric modulation of SARS-CoV-2 PLpro and provided a novel site for allosteric inhibitors design.