The final step of tRNA splicing in Saccharomyces cerevisiae requires 2'-phosphotransferase (Tpt1) to transfer the 2'-phosphate from ligated tRNA to NAD, producing mature tRNA and ADP ribose-1' '-2' '-cyclic phosphate. To address how Tpt1 protein recognizes substrate RNAs, we measured the steady-state kinetic parameters of Tpt1 protein with 2'-phosphorylated ligated tRNA and a variety of related substrates. Tpt1 protein has a high apparent affinity for ligated tRNA (K(m,RNA), 0.35 nM) and a low turnover rate (k(cat), 0.3 min(-1)). Tpt1 protein recognizes both tRNA and the internal 2'-phosphate of RNAs. Steady-state kinetic analysis reveals that as RNAs lose structure and length, K(m,RNA) and k(cat) both increase commensurately. For a 2'-phosphorylated octadecamer derived from the anticodon stem-loop of ligated tRNA, K(m,RNA) and k(cat) are 5- and 8-fold higher, respectively, than for ligated tRNA, whereas for a simple substrate like pApA(p)pA, K(m,RNA) and k(cat) are 430- and 150-fold higher, respectively. Tpt1 is not detectably active on a trimer with a terminal 5'- or 3'-phosphate and is very inefficient at removal of a terminal 2'-phosphate unless there is an adjacent 3'-phosphate or phosphodiester. The K(m,NAD) for Tpt1 is substrate dependent: K(m,NAD) is 10 microM with ligated tRNA, 200 microM with pApA(p)pA, and 600 microM with pApApA(p). Preliminary analysis of KptA, a functional Tpt1 protein homologue from Escherichia coli, reveals that KptA protein is strikingly similar to yeast Tpt1 in its kinetic parameters, although E. coli is not known to have a 2'-phosphorylated RNA substrate.