The decapping of eukaryotic mRNAs is a key step in their degradation. The heteroheptameric Lsm1p-7p complex is a general activator of decapping and also functions in protecting the 3' ends of deadenylated mRNAs from a 3'-trimming reaction. Lsm1p is the unique member of the Lsm1p-7p complex, distinguishing that complex from the functionally different Lsm2p-8p complex. To understand the function of Lsm1p, we constructed a series of deletion and point mutations of the LSM1 gene and examined their effects on phenotype. These studies revealed the following: (i) Mutations affecting the predicted RNA-binding and inter-subunit interaction residues of Lsm1p led to impairment of mRNA decay, suggesting that the integrity of the Lsm1p-7p complex and the ability of the Lsm1p-7p complex to interact with mRNA are important for mRNA decay function; (ii) mutations affecting the predicted RNA contact residues did not affect the localization of the Lsm1p-7p complex to the P-bodies; (iii) mRNA 3'-end protection could be indicative of the binding of the Lsm1p-7p complex to the mRNA prior to activation of decapping, since all the mutants defective in mRNA 3' end protection were also blocked in mRNA decay; and (iv) in addition to the Sm domain, the C-terminal domain of Lsm1p is also important for mRNA decay function.