The bifunctional mammalian mRNA capping enzyme (Mce1) consists of an N-terminal triphosphatase domain Mce1(1-210) fused to a C-terminal guanylyltransferase domain Mce1(211-597). The physical domain order H(2)N-triphosphatase-guanylyltransferase-COOH mimics the temporal order of the capping reactions. To determine if the physical domain order is functionally important in vivo, we engineered an "inverted" mammalian capping enzyme InvMce1 [H(2)N-Mce1(211-597)-(1-210)-COOH]. We found that InvMce1 complemented the growth of Saccharomyces cerevisiae cet1delta and ceg1delta strains in which the endogenous yeast triphosphatase and guanylyltransferase genes were deleted. By testing truncated versions of InvMce1, we determined that Mce1(1-178) comprises a minimal functional triphosphatase domain. Baculovirus phosphatase (BVP) is a monofunctional single-domain protein with RNA triphosphatase and RNA diphosphatase activities and an undefined role in viral RNA metabolism. Here we demonstrated that BVP can function as an RNA triphosphatase for cap formation in vivo when fused to the C-terminus of Mce1(211-597). By characterizing a series of InvMce1-BVP derivatives with amino acid substitutions in the phosphate-binding loop of BVP, we showed that the in vivo activity of the mutant chimeras in cap formation is contingent upon in vitro phosphohydrolase activity of the respective BVP proteins. BVP catalysis in vitro was not limited to 5'-phosphorylated RNA or nucleotide substrates, but also embraced tripolyphosphatase and pyrophosphatase activities. BVP-specific activities with nucleotide and inorganic substrates were as follows: ATP (14 min(-1)), ADP (31 min(-1)), PPP(i) (3.7 min(-1)), and PP(i) (1 min(-1)). BVP did not hydrolyze AMP. We surmise that BVP has adapted the cysteinyl phosphatase fold to the hydrolysis of phosphoanhydrides.