Eukaryotic cells primarily utilize exoribonucleases and decapping enzymes to degrade their mRNA. Two major decapping enzymes have been identified. The hDcp2 protein catalyzes hydrolysis of the 5' cap linked to an RNA moiety, whereas the scavenger decapping enzyme, DcpS, functions on a cap structure lacking the RNA moiety. DcpS is a member of the histidine triad (HIT) family of hydrolases and catalyzes the cleavage of m7GpppN. HIT proteins are homodimeric and contain two conserved 100-amino-acid HIT fold domains with independent active sites that are each sufficient to bind and hydrolyze cognate substrates. We carried out a functional characterization of the DcpS enzyme and demonstrate that unlike previously described HIT proteins, DcpS is a modular protein that requires both the core HIT fold at the carboxyl-terminus and sequences at the amino-terminus of the protein for cap binding and hydrolysis. Interestingly, DcpS can efficiently compete for and hydrolyze the cap structure even in the presence of excess eIF4E, implying that DcpS could function to alleviate the accumulation of complexes between eIF4E and cap structure that would otherwise accumulate following mRNA decay. Using immunofluorescence microscopy, we demonstrate that DcpS is predominantly a nuclear protein, with low levels of detected protein in the cytoplasm. Furthermore, analysis of the endogenous hDcp2 protein reveals that in addition to the cytoplasmic foci, it is also present in the nucleus. These data reveal that both decapping enzymes are contained in the nuclear compartment, indicating that they may fulfill a greater function in the nucleus than previously appreciated.