Tgs1 is the hypermethylase responsible for m(3)G cap formation of U small nuclear RNAs (U snRNAs) and small nucleolar RNAs (snoRNAs). In vertebrates, hypermethylation of snRNAs occurs in the cytoplasm, whereas this process takes place in the nucleus for snoRNAs. Accordingly, the hypermethylase is found in both compartments with a diffuse localization in the cytoplasm and a concentration in Cajal bodies in the nucleoplasm. In this study, we report that the Tgs1 hypermethylase exists as two species, a full-length cytoplasmic isoform and a shorter nuclear isoform of 65-70 kDa. The short isoform exhibits methyltransferase activity and associates with components of box C/D and H/ACA snoRNPs, pointing to a role of this isoform in hypermethylation of snoRNAs. We also show that production of the short Tgs1 isoform is inhibited by MG132, suggesting that it results from proteasomal limited processing of the full-length Tgs1 protein. Together, our results suggest that proteasome maturation constitutes a mechanism regulating Tgs1 function by generating Tgs1 species with different substrate specificities, subcellular localizations, and functions.