Characterization of the phosphohydrolytic activities of recombinant reovirus lambda 1 protein demonstrates that, in addition to the previously reported nucleoside triphosphate phosphohydrolase and helicase activities, the protein also possesses RNA 5'-triphosphatase activity, This activity was absolutely dependent on the presence of a divalent cation, Mg2+ or Mn2+, and specifically removes the 5'-gamma-phosphate at the end of triphosphate-terminated RNAs, Kinetic competition analysis showed that nucleoside triphosphate phosphohydrolase and RNA 5'-triphosphatase reactions are carried out at a common active site, These results strongly support the idea that, in addition to its role as an RNA helicase during transcription of the viral genome, lambda 1 also participates during formation of the cap structure at the 5' end of newly synthesized reovirus mRNAs, The lambda 1 protein represents only the third RNA triphosphatase whose primary structure is known and the first described in a double stranded RNA virus.