The yeast tRNA(His) guanylyltransferase (Thg1) is an essential enzyme in yeast. Thg1 adds a single G residue to the 5' end of tRNA(His) (G(-1)), which serves as a crucial determinant for aminoacylation of tRNA(His). Thg1 is the only known gene product that catalyzes the 3'-5' addition of a single nucleotide via a normal phosphodiester bond, and since there is no identifiable sequence similarity between Thg1 and any other known enzyme family, the mechanism by which Thg1 catalyzes this unique reaction remains unclear. We have altered 29 highly conserved Thg1 residues to alanine, and using three assays to assess Thg1 catalytic activity and substrate specificity, we have demonstrated that the vast majority of these highly conserved residues (24/29) affect Thg1 function in some measurable way. We have identified 12 Thg1 residues that are critical for G(-1) addition, based on significantly decreased ability to add G(-1) to tRNA(His) in vitro and significant defects in complementation of a thg1Delta yeast strain. We have also identified a single Thg1 alteration (D68A) that causes a dramatic decrease in the rigorous specificity of Thg1 for tRNA(His). This single alteration enhances the k(cat)/K(M) for ppp-tRNA(Phe) by nearly 100-fold relative to that of wild-type Thg1. These results suggest that Thg1 substrate recognition is at least in part mediated by preventing recognition of incorrect substrates for nucleotide addition.