The yeast Saccharomyces cerevisiae mRNA capping enzyme is composed of two subunits of alpha (52 kDa, mRNA guanylyltransferase) and beta (80 kDa, RNA 5'-triphosphatase). We have isolated the alpha subunit gene (CEG1) by immunological screening. In this report, with the aid of partial amino acid sequences of purified yeast capping enzyme, we isolated the gene, designated CET1, encoding the S. cerevisiae capping enzyme beta subunit. Amino acid sequence analysis revealed that the gene encodes for 549 amino acids with a calculated M(r) of 61,800 which is unexpectedly smaller than the size estimated by SDS-PAGE. Gene disruption experiment showed that CET1 is essential for yeast cell growth. The purified recombinant CET1 gene product, Cet1, exhibited an RNA 5'-triphosphatase activity which specifically removed the gamma-phosphate from the triphosphate-terminated RNA substrate, but not from nucleoside triphosphates, confirming the identity of the gene. Interaction between the Cet1 and the Ceg1 was also studied by the West-Western procedure using recombinant Ceg1-[32P]GMP as probe.