Human and fission yeast cDNAs encoding mRNA (guanine-N7) methyltransferase were identified based on similarity of the human (Hcm1p; 476 amino acids) and Schizosaccharomyces pombe (Pcm1p; 389 amino acids) polypeptides to the cap methyltransferase of Saccharomyces cerevisiae (Abd1p). Expression of PCM1 or HCM1 in S. cerevisiae complemented the lethal phenotype resulting from deletion of the ABD1 gene, as did expression of the NH2-terminal deletion mutants PCM1(94-389) and HCM1(121-476). The CCM1 gene encoding Candida albicans cap methyltransferase (Ccm1p; 474 amino acids) was isolated from a C. albicans genomic library by selection for complementation of the conditional growth phenotype of S. cerevisiae abd1-ts mutants. Human cap methyltransferase was expressed in bacteria, purified, and characterized. Recombinant Hcm1p catalyzed quantitative S-adenosylmethionine-dependent conversion of GpppA-capped poly(A) to m7GpppA-capped poly(A). We identified by alanine-scanning mutagenesis eight amino acids (Asp-203, Gly-207, Asp-211, Asp-227, Arg-239, Tyr-289, Phe-291, and Phe-354) that are essential for human cap methyltransferase function in vivo. All eight residues are conserved in other cellular cap methyltransferases. Five of the mutant human proteins (D203A, R239A, Y289A, F291A, and F354A) were expressed in bacteria and found to be defective in cap methylation in vitro. Concordance of mutational effects on Hcm1p, Abd1p, and vaccinia capping enzyme underscores a conserved structural basis for cap methylation in DNA viruses, yeast, and metazoans. This is in contrast to the structural and mechanistic divergence of the RNA triphosphatase components of the yeast and metazoan capping systems. Nevertheless, we demonstrate that the entire three-component yeast capping apparatus, consisting of RNA 5'-triphosphatase (Cet1p), RNA guanylyltransferase (Ceg1p), and Abd1p could be replaced in vivo by the two-component mammalian apparatus consisting of a bifunctional triphosphatase-guanylyltransferase Mce1p and the methyltransferase Hcm1(121-476)p. Isogenic yeast strains with fungal versus mammalian capping systems should facilitate rational screens for antifungal drugs that target cap formation in vivo.