Bacteriophage T4 RNA ligase 2 (Rnl2) exemplifies a subfamily of RNA strand-joining enzymes that includes the trypanosome RNA editing ligases. A homolog of T4 Rnl2 is encoded in the 244-kbp DNA genome of vibriophage KVP40. We show that the 335-amino acid KVP40 Rnl2 is a monomeric protein that catalyzes RNA end-joining through ligase-adenylate and RNA-adenylate (AppRNA) intermediates. In the absence of ATP, pre-adenylated KVP40 Rnl2 reacts with an 18-mer 5'-PO(4) single-strand RNA (pRNA) to form an 18-mer RNA circle. In the presence of ATP, Rnl2 generates predominantly AppRNA. Isolated AppRNA can be circularized by KVP40 Rnl2 in the absence of ATP. The reactivity of phage Rnl2 and the distribution of the products are affected by the length of the pRNA substrate. Whereas 18-mer and 15-mer pRNAs undergo intramolecular sealing by T4 Rnl2 to form monomer circles, a 12-mer pRNA is ligated intermolecularly to form dimers, and a 9-mer pRNA is unreactive. In the presence of ATP, the 15-mer and 12-mer pRNAs are converted to AppRNAs, but the 9-mer pRNA is not. A single 5' deoxynucleotide substitution of an 18-mer pRNA substrate has no apparent effect on the 5' adenylation or circularization reactions of T4 Rnl2. In contrast, a single deoxyribonucleoside at the 3' terminus strongly and selectively suppresses the sealing step, thereby resulting in accumulation of high levels of AppRNA in the absence of ATP. The ATP-dependent "capping" of RNA with AMP by Rnl2 is reminiscent of the capping of eukaryotic mRNA with GMP by GTP:RNA guanylyltransferase and suggests an evolutionary connection between bacteriophage Rnl2 and eukaryotic RNA capping enzymes.