Plasmid vectors capable of expressing the large and small subunits of the vaccinia virus mRNA capping enzyme were constructed and used to transform Escherichia coli. Conditions for the induction of the dimeric enzyme or the individual subunits in a soluble form were identified, and the capping enzyme was purified to near homogeneity. Proteolysis of the capping enzyme in bacteria yields a 60-kDa product shown previously to possess the mRNA triphosphatase and guanyltransferase activities (Shuman, S. (1990) J. Biol. Chem. 265, 11960-11966) was isolated and shown by amino acid sequence analysis to be derived from the NH2 terminus of D1R. The individual subunits lacked methyltransferase activity when assayed alone. However, mixing the D1R and D12L subunits permitted reconstitution of the methyltransferase activity, and this appearance in activity accompanied the association of the subunits. In contrast, mixing the D12L subunit with the D1R-60K proteolytic fragment failed to yield methyltransferase activity or result in a physical association of the two proteins. These results demonstrate that the methyltransferase active site requires the presence of the D12L subunit with the carboxyl-terminal portion of the D1R subunit. Furthermore, since the mRNA triphosphatase and guanyltransferase active sites reside in the NH2-terminal domain of the D1R subunit, and the methyltransferase activity is found in the carboxyl-terminal portion of this subunit and D12L, there must be at least two separate active sites in this enzyme.