A unique characteristic of eukaryotic mRNA is the N7-methylated guanosine cap structure that is cotranscriptionally added to the 5′ terminus of nascent RNA (40). The cap serves to protect the 5′ end of the mRNA from exoribonucleolytic degradation (49). It also functions in the transport of mature mRNA from the nucleus to the cytoplasm (18, 20), in translation initiation (12), and in pre-mRNA splicing (24). The cap is bound by distinct cap-binding proteins in each cellular compartment. A heterodimeric complex of CBC20 and CBC80 binds the cap in the nucleus (19), while eIF4E, the translation initiation factor, associates with the cap in the cytoplasm (12). In addition to these major cap binding proteins, several other factors have also been demonstrated to bind the mRNA cap, including the mammalian poly(A)-binding protein (22), the cold shock protein YB-1 (10), and the scavenger decapping protein (28, 37). Decay of mRNA is not a randomized process and proceeds through at least two major decay pathways, both of which are initiated by removal of the poly(A) tail (31). Following deadenylation, the mRNA is decapped and degraded by a 5′ to 3′ exonucleolytic activity in the 5′ decay pathway. In the 3′ decay pathway, the mRNA is continuously degraded from the 3′ end following deadenylation, generating an m7GpppN cap dinucleotide that is hydrolyzed by a scavenger decapping activity (27, 48). Each mRNA decay pathway utilizes a unique decapping activity with a distinct substrate specificity (7). In the 5′ pathway, both the yeast and human Dcp2 proteins utilize capped mRNA as a substrate and hydrolyze the cap structure to generate m7GDP and RNA with a monophosphate at its 5′ end (29, 41, 43, 47). The exposed 5′ end of the RNA is degraded by Xrn1p, the 5′ to 3′ exoribonuclease, leading to rapid degradation of the RNA body (4, 17, 25). A scavenger decapping activity termed DcpS in mammals and Dcs1p in budding yeast functions in the final step of the 3′ decay pathway. This activity hydrolyzes the residual cap structure following 3′ to 5′ exonucleolytic decay by the exosome complex to release m7GMP and nucleotide diphosphate (27, 48). Characterization of scavenger decapping activity indicates its strong preference for binding and hydrolyzing cap structure linked to an RNA of less than 10 nucleotides in mammals and 3 nucleotides in Caenorhabditis elegans (6, 27, 28). Recent structural analysis of DcpS reveals that it can form either an asymmetric dimer bound to two cap dinucleotides (13) or a symmetric dimer in the ligand-free protein (5). The dimers contain distinct amino-terminal and carboxyl-terminal domains separated by a hinge region (13). The structure indicates that the N terminus can flip back and forth, alternating on each side from a productive closed to a nonproductive open conformation (13). An interesting property of DcpS is its almost exclusive utilization of the residual cap dinucleotide following 3′ exonucleolytic decay of the RNA (27, 28). This substrate specificity is due in part to a higher affinity of DcpS for the cap structure (28) and more significantly to both entropic and steric constraints in the formation of a closed decapping-competent complex in the presence of an mRNA moiety on the cap (13). Saccharomyces cerevisiae contains two proteins termed Dcs1p and Dcs2p that are equally homologous to the human DcpS. Curiously, only Dcs1p possesses intrinsic decapping activity analogous to that of DcpS (27). The enzymatic activity and substrate specificity for Dcs2p remain unknown, although its ability to heterodimerize with Dcs1p suggests that it might be a modulator of Dcs1p decapping activity (30). Dcs1p is a member of the histidine triad (HIT) family of nucleotide binding proteins and contains the characteristic HIT motif (His-X-His-X-His-X, where X is a hydrophobic amino acid) which is required for its cap hydrolysis activity (27). By virtue of its ability to hydrolyze the cap dinucleotide (27), DcpS and Dcs1p are postulated to function during the terminal phase of mRNA decay. Here we demonstrate that Dcs1p also functions to impact the 5′ mRNA decay pathway.