Decapping is a critical step in mRNA decay. In the 5'-to-3' mRNA decay pathway conserved in all eukaryotes, decay is initiated by poly(A) shortening, and oligoadenylated mRNAs (but not polyadenylated mRNAs) are selectively decapped allowing their subsequent degradation by 5' to 3' exonucleolysis. The highly conserved heptameric Lsm1p-7p complex (made up of the seven Sm-like proteins, Lsm1p-Lsm7p) and its interacting partner Pat1p activate decapping by an unknown mechanism and localize with other decapping factors to the P-bodies in the cytoplasm. The Lsm1p-7p-Pat1p complex also protects the 3'-ends of mRNAs in vivo from trimming, presumably by binding to the 3'-ends. In order to determine the intrinsic RNA-binding properties of this complex, we have purified it from yeast and carried out in vitro analyses. Our studies revealed that it directly binds RNA at/near the 3'-end. Importantly, it possesses the intrinsic ability to distinguish between oligoadenylated and polyadenylated RNAs such that the former are bound with much higher affinity than the latter. These results indicate that the intrinsic RNA-binding characteristics of this complex form a critical determinant of its in vivo interactions and functions.