A human cDNA was isolated encoding a protein with significant sequence similarity (41% identity) to the BVP RNA 5'-phosphatase from the Autographa californica nuclear polyhedrosis virus. This protein is a member of the protein-tyrosine phosphatase (PTP) superfamily and is identical to PIR1, shown by Yuan et al. (Yuan, Y., Da-Ming, L., and Sun, H. (1998) J. Biol. Chem. 272, 20347-20353) to be a nuclear protein that can associate with RNA or ribonucleoprotein complexes. We demonstrate that PIR1 removes two phosphates from the 5'-triphosphate end of RNA, but not from mononucleotide triphosphates. The specific activity of PIR1 with RNA is several orders of magnitude greater than that with the best protein substrates examined, suggesting that RNA is its physiological substrate. A 120-amino acid segment C-terminal to the PTP domain is not required for RNA phosphatase activity. We propose that PIR1 and its closest homologs, which include the metazoan mRNA capping enzymes, constitute a subgroup of the PTP family that use RNA as a substrate.