It has long been noted by interpreters of Luke 2.1–3 that by the reference to Caesar Augustus and his decree Luke opens up a worldwide horizon in order to underline the universal importance of Jesus’ birth. While the recent discussion of this short passage is largely concerned with explaining the historical background of the decree and its initiator Augustus, the present study, in which Luke-Acts is read as a narrative, provides a detailed analysis of the Lukan picture of Caesar Augustus. By use of a narratological approach it examines how Luke characterizes the figure of this Roman emperor and what role he and the decree play in the narrative in Luke 1–2, especially in relation to the characterization of God and Jesus Christ. At the end of this study its results are related to the geographical orientation of the world presented by Luke in the first two chapters of his Gospel.