Pcf11p, an essential subunit of the yeast cleavage factor IA, is required for pre-mRNA 3' end processing, binds to the C-terminal domain (CTD) of the largest subunit of RNA polymerase II (RNAP II) and is involved in transcription termination. We show that the conserved CTD interaction domain (CID) of Pcf11p is essential for cell viability. Interestingly, the CTD binding and 3' end processing activities of Pcf11p can be functionally uncoupled from each other and provided by distinct Pcf11p fragments in trans. Impaired CTD binding did not affect the 3' end processing activity of Pcf11p and a deficiency of Pcf11p in 3' end processing did not prevent CTD binding. Transcriptional run-on analysis with the CYC1 gene revealed that loss of cleavage activity did not correlate with a defect in transcription termination, whereas loss of CTD binding did. We conclude that Pcf11p is a bifunctional protein and that transcript cleavage is not an obligatory step prior to RNAP II termination.