Capping of RNA molecules with m7G is an essential modification which plays several roles in RNA metabolism and processing. In the nucleus it directs pre-mRNAs to the processing pathway and mRNAs and U small nuclear RNAs (U snRNAs) to the export pathway. In the cytoplasm, it regulates both mRNA translation initiation and mRNA turnover. In most eukaryotic organisms m7G capping is restricted to nascent RNA polymerase II (PolII) transcripts, namely, pre- mRNAs and precursors to U snRNAs. In contrast, in trypanosomatid protozoa mRNA capping occurs by a fundamentally different mechanism. It is well established that the m7G cap of mature mRNA is acquired posttranscriptionally by an RNA processing reaction, namely, trans splicing. In this process, the capped spliced leader (SL) sequence is transferred from the SL RNA to the 5′ ends of all trypanosome mRNAs (14, 23, 36). Thus, trans splicing can also be considered a trans-capping reaction. The cap structure of the Trypanosoma brucei and Crithidia fasciculata SL RNA is quite elaborate in that the m7G moiety is linked via a 5′-5′ triphosphate bridge to four methylated nucleotides, resulting in an unusual cap 4 structure (2) which is essential for utilization of the SL RNA in trans splicing (18, 43). At present the identity of the RNA polymerase transcribing the SL RNA genes is not defined, because the standard classification based on transcription inhibitors gave conflicting results as to whether PolII or PolIII is the responsible polymerase (8, 25, 26, 42). In addition to the SL RNA, a subset of trypanosome PolIII transcripts, namely, the U2, U3, and U4 snRNAs, is also initially m7G capped (7, 22, 24, 39). Despite the uncertainty about the polymerase transcribing the SL RNA genes, the fact that some PolIII transcripts are capped suggests that the mechanism of transcript selection by the capping enzyme is different in trypanosomes from that in other eukaryotes. m7G capping is mediated by the stepwise action of three enzymatic activities (for a review, see reference 33). First, the γ-phosphate of a primary transcript is removed by RNA 5′-triphosphatase followed by GTP:RNA guanylyltransferase, or capping enzyme, which caps the RNA by the addition of GMP. Finally, the newly attached guanine residue is methylated at the N-7 position by the action of RNA (guanine-7-)methyltransferase. So far, only the reaction mechanism of guanylyltransferase has been examined in some detail. This enzyme catalyzes two sequential nucleotidyl transfer reactions, with a covalent enzyme-guanylate intermediate (19, 30). In this reaction, nucleophilic attack on the α-phosphate of GTP by guanylyltransferase results in the release of pyrophosphate and the formation of a covalent adduct in which GMP is linked to the guanylyltransferase through a phosphoamide bond to the ɛ-amino group of the catalytic lysine residue (30, 34, 38). To complete the reaction, GMP is transferred to the 5′ end of substrate RNA to yield an inverted 5′-5′ triphosphate bond. The vaccinia virus capping enzyme is a multifunctional protein that carries out all three steps of the capping reaction (21, 40, 44). The protein is organized as a heterodimer, with subunits of 95 and 33 kDa (4, 10, 16, 29, 32). The RNA 5′-triphosphatase and guanylyltransferase have been mapped to the amino-terminal 60-kDa domain of the large subunit, while full (guanine-7-)methyltransferase activity requires both subunits. The subunit structure of the vaccinia virus capping enzyme is only partially maintained in cellular counterparts. In particular, cellular capping enzymes are distinct from their viral counterparts in that there is so far no example of a physical association between the capping and methyltransferase functions. In Saccharomyces cerevisiae, the purified capping enzyme consists of two monofunctional polypeptides: a 52-kDa guanylyltransferase and an 80-kDa triphosphatase (12, 13, 28). The guanylyltransferase is the product of the CEG1 gene, which is essential for cell viability (28). As in higher eukaryotes, the yeast (guanine-7-)methyltransferase is purified as a separate entity and is encoded by the ABD1 gene (15). The monofunctional domain structure of the guanylyltransferase is also present in other fungi, such as Schizosaccharomyces pombe (31) and Candida albicans (49), and in Chlorella virus PBCV-1 (11). In higher eukaryotes, biochemical fractionation has shown that the guanylyltransferase from rat liver copurifies with an RNA triphosphatase activity but that the (guanine-7-)methyltransferase readily separates in early chromatography steps and purifies as an unassociated enzyme (48). Recent cloning of the Caenorhabditis elegans (37, 46) and mammalian (17, 50) capping enzymes showed that these enzymes consist of a single bifunctional polypeptide with two domains: a carboxy-terminal guanylyltransferase domain and an amino-terminal domain with RNA triphosphatase activity. Even though the guanylyltransferase domain is strictly conserved with respect to amino acids that are essential for in vivo function, the RNA triphosphatase domain does not resemble the vaccinia virus triphosphatase domain but rather has significant sequence and mechanistic similarities to the family of protein tyrosine phosphatases. Thus, it would appear from the above examples that unicellular and multicellular organisms differ with respect to the physical organization of enzymatic activities of the capping machinery; whereas unicellular organisms have a monofunctional guanylyltransferase, multicellular organisms have a bifunctional triphosphatase-guanylyltransferase. As a first step toward understanding the process of RNA capping in trypanosomes, we have purified the capping enzyme from C. fasciculata and cloned the corresponding genes from C. fasciculata and T. brucei. Comparison of the predicted amino acid sequences of the trypanosome proteins with those of the available eukaryotic and viral capping enzymes revealed several unique structural features. In particular, the trypanosome capping enzymes are remarkable in that they include a novel amino-terminal domain that displays no resemblance to any other domain associated with capping enzymes.