RNA (guanine-7-)-methyltransferase is the enzyme responsible for methylating the 5' cap structure of eukaryotic mRNA. The Saccharomyces cerevisiae enzyme is a 436-amino-acid protein encoded by the essential ABD1 gene. In this study, deletion and point mutations in ABD1 were tested for the ability to support growth of an abd1 null strain. Elimination of 109 amino acids from the N terminus had no effect on cell viability, whereas a more extensive N-terminal deletion of 155 residues was lethal, as was a C-terminal deletion of 55 amino acids. Alanine substitution mutations were introduced at eight conserved residues within a 206-amino-acid region of similarity between ABD1 and the methyltransferase domain of the vaccinia virus capping enzyme. ABD1 alleles H253A (encoding a substitution of alanine for histidine at position 253), T282A, E287A, E361A, and Y362A were viable, whereas G174A, D178A, and Y254A were either lethal or severely defective for growth. Alanine-substituted and amino-truncated ABD1 proteins were expressed in bacteria, purified, and tested for cap methyltransferase activity in vitro. Mutations that were viable in yeast cells had either no effect or only a moderate effect on the specific methyltransferase activity of the mutated ABD1 protein, whereas mutations that were deleterious in vivo yielded proteins that were catalytically defective in vitro. These findings substantiate for the first time the long-held presumption that cap methylation is an essential function in eukaryotic cells.