A major mechanism of mRNA decay in yeast is initiated by deadenylation, followed by mRNA decapping, which exposes the transcript to 5' to 3' exonucleolytic degradation. The decapping enzyme that removes the 5' cap structure is encoded by the DCP1 gene. To understand the function of the decapping enzyme, we used alanine scanning mutagenesis to create 31 mutant versions of the enzyme, and we examined the effects of the mutations both in vivo and in vitro. Two types of mutations that affected mRNA decapping in vivo were identified, including a temperature-sensitive allele. First, two mutants produced decapping enzymes that were defective for decapping in vitro, suggesting that these mutated residues are required for enzymatic activity. In contrast, several mutants that moderately affected mRNA decapping in vivo yielded decapping enzymes that had at least the same specific activity as the wild-type enzyme in vitro. Combination of alleles within this group yielded decapping enzymes that showed a strong loss of function in vivo, but that still produced fully active enzymes in vitro. This suggested that interactions of the decapping enzyme with other factors may be required for efficient decapping in vivo, and that these particular mutations may be disrupting such interactions. Interestingly, partial loss of decapping activity in vivo led to a defect in normal deadenylation-dependent decapping, but it did not affect the rapid deadenylation-independent decapping triggered by early nonsense codons. This observation suggested that these two types of mRNA decapping differ in their requirements for the decapping enzyme.