The Saccharomyces cerevisiae mRNA cap methylating enzyme is a 436-amino acid protein encoded by the essential ABD1 gene. To identify structural features of ABD1 required for enzyme function, we introduced alanine mutations at 19 positions within a 205-amino acid region of similarity to the methyltransferase domain of the vaccinia capping enzyme. Three new recessive lethal mutations, E170A, D194A, and R206A, were identified. Structure-function relationships were clarified by introducing conservative substitutions at Glu-170, Asp-194, and Arg-206, and at Tyr-254 (an essential residue identified previously). Alleles E170D and D194E were viable, whereas E170Q and D194N were lethal; hence, acidic side chains were critical at both positions. R206K was viable, suggesting that a basic residue sufficed. Y254S was lethal, whereas Y254F was viable, albeit slow growing; thus, an aromatic side chain was important. The ABD1 mutations that were deleterious in vivo elicited catalytic defects in vitro. By studying the effects of amino- and carboxyl-terminal deletions, we defined a fully active catalytic domain of ABD1 from residues 130 to 426. Residues 110-129 were dispensable for methyltransferase activity in vitro, but essential for function in vivo. This analysis allowed us to delineate a subfamily of ABD1-like proteins within the superfamily of AdoMet-dependent methyltransferases. In addition, we identify a candidate Caenorhabditis elegans gene encoding a putative cap methyltransferase. All residues essential for ABD1 activity are conserved in the C. elegans homologue.