A novel human cytosolic flavin reductase, Nr1, was recently described that contains FMN, FAD, and NADPH cofactors. Though the targets of the related NADPH-dependent flavoprotein reductases, cytochrome P450 reductase, methionine synthase reductase, and nitric oxide synthase, are known, the cellular function of Nr1 is not clear. To explore expression and regulation of Nr1, we cloned fre-1, the Caenorhabditis elegans ortholog of Nr1, and discovered that it is transcribed as a bicistronic pre-mRNA together with dcs-1, the ortholog of the recently described scavenger mRNA decapping enzyme. We used the novel substrate, 7meGpppBODIPY, to demonstrate that DCS-1 has low micromolar specificity for guanine ribonucleotides with the 7me modification, whereas trimethylated G substrates are poor competitors. Contrary to earlier classification, DCS-1 is not a pyrophosphatase but a distant member of the Hint branch of the histidine triad superfamily of nucleotide hydrolases and transferases. These observations are consistent with the hypothesis that DCS-1 homologs may function in the metabolism of capped oligonucleotides generated following exosome-dependent degradation of short-lived mRNA transcripts. We find that fre-1 and dcs-1 are coordinately expressed through worm development, are induced by heat shock, and have a nearly identical expression profile in human tissues. Furthermore, immunocytochemical analysis of the endogenous proteins in COS cells indicates that both are present in the nucleus and concentrated in a distinct perinuclear structure. Though no connection between these enzymes had been anticipated, our data and data from global expression and protein association studies suggest that the two enzymes jointly participate in responses to DNA damage, heat shock, and other stresses.