Cleavage and polyadenylation factor (CPF) is a multi-protein complex that functions in pre-mRNA 3'-end formation and in the RNA polymerase II (RNAP II) transcription cycle. Ydh1p/Cft2p is an essential component of CPF but its precise role in 3'-end processing remained unclear. We found that mutations in YDH1 inhibited both the cleavage and the polyadenylation steps of the 3'-end formation reaction in vitro. Recently, we demonstrated that an important function of CPF lies in the recognition of poly(A) site sequences and RNA binding analyses suggesting that Ydh1p/Cft2p interacts with the poly(A) site region. Here we show that mutant ydh1 strains are deficient in the recognition of the ACT1 cleavage site in vivo. The C-terminal domain (CTD) of RNAP II plays a major role in coupling 3'-end processing and transcription. We provide evidence that Ydh1p/Cft2p interacts with the CTD of RNAP II, several other subunits of CPF and with Pcf11p, a component of CF IA. We propose that Ydh1p/Cft2p contributes to the formation of important interaction surfaces that mediate the dynamic association of CPF with RNAP II, the recognition of poly(A) site sequences and the assembly of the polyadenylation machinery on the RNA substrate.