The nonsense-mediated mRNA decay pathway decreases the abundance of mRNAs that contain premature termination codons and prevents suppression of nonsense alleles. The UPF1 gene in the yeast Saccharomyces cerevisiae was shown to be a trans-acting factor in this decay pathway. The Upf1p demonstrates RNA-dependent ATPase, RNA helicase, and RNA binding activities. The results presented here investigate the binding affinity of the Upf1p for ATP and the consequences of ATP binding on its affinity for RNA. The results demonstrate that the Upf1p binds ATP in the absence of RNA. Consistent with this result, the TR800AA mutant form of the Upf1p still bound ATP, although it does not bind RNA. ATP binding also modulates the affinity of Upf1p for RNA. The RNA binding activity of the DE572AA mutant form of the Upf1p, which lacks ATPase activity, still bound ATP as efficiently as the wild-type Upf1p and destabilized the Upf1p-RNA complex. Similarly, ATPgammaS, a nonhydrolyzable analogue of ATP, interacted with Upf1p and promoted disassociation of the Upf1p-RNA complex. The conserved lysine residue (K436) in the helicase motif Ia in the Upf1p was shown to be critical for ATP binding. Taken together, these findings formally prove that ATP can bind Upf1p in the absence of RNA and that this interaction has consequences on the formation of the Upf1p-RNA complex. Further, the results support the genetic evidence indicating that ATP binding is important for the Upf1p to increase the translation termination efficiency at a nonsense codon. Based on these findings, a model describing how the Upf1p functions in modulating translation and turnover and the potential insights into the mechanism of the Upf1p helicase will be discussed.