Several transfer RNAs (tRNAs) contain inosine (I) at the first position of their anticodon (position 34); this modification is thought to enlarge the codon recognition capacity during protein synthesis. The tRNA-specific adenosine deaminase of Saccharomyces cerevisiae that forms I(34) in tRNAs is described. The heterodimeric enzyme consists of two sequence-related subunits (Tad2p/ADAT2 and Tad3p/ADAT3), both of which contain cytidine deaminase (CDA) motifs. Each subunit is encoded by an essential gene (TAD2 and TAD3), indicating that I(34) is an indispensable base modification in elongating tRNAs. These results provide an evolutionary link between the CDA superfamily and RNA-dependent adenosine deaminases (ADARs/ADATs).