Hypermethylation of the cap structure of both yeast snRNAs and snoRNAs requires a conserved methyltransferase that is localized to the nucleolus.

The m(7)G caps of most spliceosomal snRNAs and certain snoRNAs are converted posttranscriptionally to 2,2,7-trimethylguanosine (m(3)G) cap structures. Here, we show that yeast Tgs1p, an evolutionarily conserved protein carrying a signature of S-AdoMet methyltransferase, is essential for hypermethylation of the m(7)G caps of both snRNAs and snoRNAs. Deletion of the yeast TGS1 gene abolishes the conversion of the m(7)G to m(3)G caps and produces a cold-sensitive splicing defect that correlates with the retention of U1 snRNA in the nucleolus. Consistently, Tgs1p is also localized in the nucleolus. Our results suggest a trafficking pathway in which yeast snRNAs and snoRNAs cycle through the nucleolus to undergo m(7)G cap hypermethylation.