Sm and Sm-like (LSm) proteins form heptameric complexes that are involved in various steps of RNA metabolism. In yeast, the Lsm1-7 complex functions in mRNA degradation and is associated with several enzymes of this pathway, while the complex LSm2-8, the composition of which largely overlaps with that of LSm1-7, has a role in pre-mRNA splicing. A human gene encoding an LSm1 homolog has been identified, but its role in mRNA degradation has yet to be elucidated. We performed subcellular localization studies and found hLSm1 predominantly in the cytoplasm. However, it is not distributed evenly; rather, it is highly enriched in small, discrete foci. The endogenous hLSm4 is similarly localized, as are the overexpressed proteins hLSm1-7, but not hLSm8. The foci also contain two key factors in mRNA degradation, namely the decapping enzyme hDcp1/2 and the exonuclease hXrn1. Moreover, coexpression of wild-type and mutant LSm proteins, as well as fluorescence resonance energy transfer (FRET) studies, indicate that the mammalian proteins hLSm1-7 form a complex similar to the one found in yeast, and that complex formation is required for enrichment of the proteins in the cytoplasmic foci. Therefore, the foci contain a partially or fully assembled machinery for the degradation of mRNA.