Molnupiravir is an oral broad-spectrum nucleotide analog that enhances mutagenesis. Although authorized for COVID-19 treatment, its use raises concerns about a potential sublethal mutagenesis that could accelerate SARS-CoV-2 evolution and generate variants with enhanced pathogenicity, immune escape or antiviral resistance. To address these concerns, we performed cell culture and animal studies to characterize the effects of molnupiravir exposure on SARS-CoV-2. Compared to the original virus (OV), the molnupiravir-exposed virus 1 (MEV1) exhibited increased genetic diversity, with a 24-fold increase in new single-nucleotide polymorphisms (SNPs) and 16-to-290-fold increases in molnupiravir-signature transitions. MEV1 also acquired numerous substitutions across the genome, including in the Nsp12 and Nsp14 proteins involved in molnupiravir antiviral activity. In growth kinetics assays, compared to OV, MEV1 maintained viral fitness in Vero E6 and A549-ACE2 cells but exhibited reduced fitness in Calu-3 cells. High quasispecies diversity was maintained after MEV1 was serially passaged without drug pressure in Vero E6 and in A549-ACE2 cells. Compared to OV, infection with MEV1 caused attenuated disease in Syrian hamsters, characterized by preserved body weight, milder lung pathology, reduced viral loads and a blunted host interferon transcriptional response. MEV1 also exhibited reduced susceptibility to molnupiravir compared to OV, showing a 2-fold increase in EC₅₀ and higher infectivity titers with reduced mutagenesis after molnupiravir re-treatment. Such a phenotype was not mediated by Nsp12 or Nsp14 substitutions. In independent molnupiravir exposure experiments, MEV2 and MEV3 exhibited different mutational landscapes than MEV1 but similar reduced susceptibility to molnupiravir re-treatment. Interestingly, all MEVs maintained their susceptibility and barrier to resistance to remdesivir. In conclusion, molnupiravir-induced sublethal mutagenesis significantly enhanced SARS-CoV-2 quasispecies diversity, which resulted in reduced molnupiravir susceptibility. Importantly, hypermutated SARS-CoV-2 populations decreased virulence in vivo and did not accelerate the emergence of antiviral resistance, supporting the safe and broader use of molnupiravir against RNA viruses.