Post-transcriptional modification of the tRNA anticodon loop is critical for translation. Yeast Trm7 is required for 2'-O-methylation of C(32) and N(34) of tRNA(Phe), tRNA(Trp), and tRNA(Leu(UAA)) to form Cm(32) and Nm(34), and trm7-Δ mutants have severe growth and translation defects, but the reasons for these defects are not known. We show here that overproduction of tRNA(Phe) suppresses the growth defect of trm7-Δ mutants, suggesting that the crucial biological role of Trm7 is the modification of tRNA(Phe). We also provide in vivo and in vitro evidence that Trm7 interacts with ORF YMR259c (now named Trm732) for 2'-O-methylation of C(32), and with Rtt10 (named Trm734) for 2'-O-methylation of N(34) of substrate tRNAs and provide evidence for a complex circuitry of anticodon loop modification of tRNA(Phe), in which formation of Cm(32) and Gm(34) drives modification of m(1)G(37) (1-methylguanosine) to yW (wyebutosine). Further genetic analysis shows that the slow growth of trm7-Δ mutants is due to the lack of both Cm(32) and Nm(34), and the accompanying loss of yW, because trm732-Δ trm734-Δ mutants phenocopy trm7-Δ mutants, whereas each single mutant is healthy; nonetheless, TRM732 and TRM734 each have distinct roles, since mutations in these genes have different genetic interactions with trm1-Δ mutants, which lack m(2,2)G(26) in their tRNAs. We speculate that 2'-O-methylation of the anticodon loop may be important throughout eukaryotes because of the widespread conservation of Trm7, Trm732, and Trm734 proteins, and the corresponding modifications, and because the putative human TRM7 ortholog FTSJ1 is implicated in nonsyndromic X-linked mental retardation.