The N7-methylguanosine (m7G) cap is the defining structural feature of eukaryotic mRNAs. Most eukaryotic viruses that replicate in the cytoplasm, including coronaviruses, have evolved strategies to cap their RNAs. In this report, we used a yeast genetic system to functionally screen for the cap-forming enzymes encoded by severe acute respiratory syndrome (SARS) coronavirus and identified the nonstructural protein (nsp) 14 of SARS coronavirus as a (guanine-N7)-methyltransferase (N7-MTase) in vivo in yeast cells and in vitro using purified enzymes and RNA substrates. Interestingly, coronavirus nsp14 was previously characterized as a 3'-to-5' exoribonuclease, and by mutational analysis, we mapped the N7-MTase domain to the carboxy-terminal part of nsp14 that shows features conserved with cellular N7-MTase in structure-based sequence alignment. The exoribonuclease active site was dispensable but the exoribonuclease domain was required for N7-MTase activity. Such combination of the 2 functional domains in coronavirus nsp14 suggests that it may represent a novel form of RNA-processing enzymes. Mutational analysis in a replicon system showed that the N7-MTase activity was important for SARS virus replication/transcription and can thus be used as an attractive drug target to develop antivirals for control of coronaviruses including the deadly SARS virus. Furthermore, the observation that the N7-MTase of RNA life could function in lieu of that in DNA life provides interesting evolutionary insight and practical possibilities in antiviral drug screening.