Internal bases in mRNA can be subjected to modifications that influence the fate of mRNA in cells. One of the most prevalent modified bases is found at the 5' end of mRNA, at the first encoded nucleotide adjacent to the 7-methylguanosine cap. Here we show that this nucleotide, N6,2'-O-dimethyladenosine (m6Am), is a reversible modification that influences cellular mRNA fate. Using a transcriptome-wide map of m6Am we find that m6Am-initiated transcripts are markedly more stable than mRNAs that begin with other nucleotides. We show that the enhanced stability of m6Am-initiated transcripts is due to resistance to the mRNA-decapping enzyme DCP2. Moreover, we find that m6Am is selectively demethylated by fat mass and obesity-associated protein (FTO). FTO preferentially demethylates m6Am rather than N6-methyladenosine (m6A), and reduces the stability of m6Am mRNAs. Together, these findings show that the methylation status of m6Am in the 5' cap is a dynamic and reversible epitranscriptomic modification that determines mRNA stability.