The molecular mechanism of mRNA degradation in the chloroplast consists of sequential events, including endonucleolytic cleavage, the addition of poly(A)-rich sequences to the endonucleolytic cleavage products, and exonucleolytic degradation. In spinach chloroplasts, the latter two steps of polyadenylation and exonucleolytic degradation are performed by the same phosphorolytic and processive enzyme, polynucleotide phosphorylase (PNPase). An analysis of its amino acid sequence shows that the protein is composed of two core domains related to RNase PH, two RNA binding domains (KH and S1), and an alpha-helical domain. The amino acid sequence and domain structure is largely conserved between bacteria and organelles. To define the molecular mechanism that controls the two opposite activities of this protein in the chloroplast, the ribonuclease, polymerase, and RNA binding properties of each domain were analyzed. The first core domain, which was predicted to be inactive in the bacterial enzymes, was active in RNA degradation but not in polymerization. Surprisingly, the second core domain was found to be active in degrading polyadenylated RNA only, suggesting that nonpolyadenylated molecules can be degraded only if tails are added, apparently by the same protein. The poly(A) high-binding-affinity site was localized to the S1 domain. The complete spinach chloroplast PNPase, as well as versions containing the core domains, complemented the cold sensitivity of an Escherichia coli PNPase-less mutant. Phylogenetic analyses of the two core domains showed that the two domains separated very early, resulting in the evolution of the bacterial and organelle PNPases and the exosome proteins found in eukaryotes and some archaea.