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Understanding and adhering to traffic regulations is essential for autonomous vehicles to ensure safety and trustworthiness. However, traffic regulations are complex, context-dependent, and differ between regions, posing a major challenge to conventional rule-based decision-making approaches. We present an interpretable, regulation-aware decision-making framework, DriveReg, which enables autonomous vehicles to understand and adhere to region-specific traffic laws and safety guidelines. The framework integrates a Retrieval Augmented Generation (RAG)-based Traffic Regulation Retrieval Agent, which retrieves relevant rules from regulatory documents based on the current situation, and a Large Language Model (LLM)-powered Reasoning Agent that evaluates actions for legal compliance and safety. Our design emphasizes interpretability to enhance transparency and trustworthiness. To support systematic evaluation, we introduce DriveReg Scenarios Dataset, a comprehensive dataset of driving scenarios across Boston, Singapore, and Los Angeles, with both hypothesized text-based cases and real-world driving data, specifically constructed and annotated to evaluate models’ capacity for regulation understanding and reasoning. We validate our framework on the DriveReg Scenarios Dataset and real-world deployment, demonstrating strong performance and robustness across diverse environments.