The eukaryotic "scavenger" type decapping enzyme, an m(7)GpppX pyrophosphatase, is active in cellular mRNA metabolism and thereby influences posttranscriptional gene expression. The yeast version of this enzyme, Dcs1, catalyses cleavage of 5'end m(7)G-oligoribonucleotide fragments generated by 3'-->5' exonucleolytic decay, and cleavage of m(7)GDP generated by Dcp1/Dcp2-mediated decapping in the 5'-->3' decay pathway. We show that Dcs1 is active as a homodimer with low KM values for cleavage of m(7)GpppG (0.14 microM) and m(7)GDP (0.26 microM). Previous work showed that the paralogous DCS2 gene is transcriptionally induced via the amp-PKA pathway as yeast enters diauxie. The resulting Dcs2 protein forms a heterodimer together with Dcs1, both modulating Dcs1 substrate specificity and suppressing its k(cat). Since Dcs2 is recruited into cytoplasmic P bodies, its inhibitory function may be focused in these centres of mRNA storage/turnover. Dcs2 is therefore a novel type of stress-induced regulatory protein that modulates m(7)GpppX pyrophosphatase activity. Moreover, inhibition of Dcs1 activity by Dcs2, like depletion of Dcs1, reduces chronological life span, possibly by modulating m(7)G misincorporation into nucleic acids. This could potentially link control of mRNA metabolism with senescence.