In metazoa cap 1 (m(7)GpppNmp-RNA) is linked to higher levels of translation; however, the enzyme responsible remains unidentified. We have validated the first eukaryotic encoded cap 1 2'-O-ribose methyltransferase, TbMTr1, a member of a conserved family that modifies the first transcribed nucleotide of spliced leader and U1 small nuclear RNAs in the kinetoplastid protozoan Trypanosoma brucei. In addition to cap 0 (m(7)GpppNp-RNA), mRNA in these parasites has ribose methylations on the first four nucleotides with base methylations on the first and fourth (m(7)Gpppm(6,6)AmpAmpCmpm(3)Ump-SL RNA) conveyed via trans-splicing of a universal spliced leader. The function of this cap 4 is unclear. Spliced leader is the majority RNA polymerase II transcript; the RNA polymerase III-transcribed U1 small nuclear RNA has the same first four nucleotides as spliced leader, but it receives an m(2,2,7)G cap with hypermethylation at position one only (m(2,2,7)Gpppm(6,6)AmpApCpUp-U1 snRNA). Here we examine the biochemical properties of recombinant TbMTr1. Active over a pH range of 6.0 to 9.5, TbMTr1 is sensitive to Mg(2+). Positions Lys(95)-Asp(204)-Lys(259)-Glu(285) constitute the conserved catalytic core. A guanosine cap on RNA independent of its N(7) methylation status is required for substrate recognition, but an m(2,2,7G)-cap is not recognized. TbMTr1 favors the spliced leader 5' sequence, as reflected by a preference for A at position 1 and modulation of activity for substrates with base changes at positions 2 and 3. With similarities to human cap 1 methyltransferase activity, TbMTr1 is an excellent model for higher eukaryotic cap 1 methyltransferases and the consequences of cap 1 modification.