We have conducted a biochemical and genetic analysis of mouse mRNA capping enzyme (Mce1), a bifunctional 597-amino acid protein with RNA triphosphatase and RNA guanylyltransferase activities. The principal conclusions are as follows: (i) the mammalian capping enzyme consists of autonomous and nonoverlapping functional domains; (ii) the guanylyltransferase domain Mce1(211-597) is catalytically active in vitro and functional in vivo in yeast in lieu of the endogenous guanylyltransferase Ceg1; (iii) the guanylyltransferase domain per se binds to the phosphorylated RNA polymerase II carboxyl-terminal domain (CTD), whereas the triphosphatase domain, Mce1(1-210), does not bind to the CTD; and (iv) a mutation of the active site cysteine of the mouse triphosphatase elicits a strong growth-suppressive phenotype in yeast, conceivably by sequestering pre-mRNA ends in a nonproductive complex or by blocking access of the endogenous yeast triphosphatase to RNA polymerase II. These findings contribute to an emerging model of mRNA biogenesis wherein RNA processing enzymes are targeted to nascent polymerase II transcripts through contacts with the CTD. The phosphorylation-dependent interaction between guanylyltransferase and the CTD is conserved from yeast to mammals.