Endonuclease decay of nonsense-containing beta-globin mRNA in erythroid cells generates 5'-truncated products that were reported previously to have a cap or caplike structure. We confirmed that this 5' modification is indistinguishable from the cap on full-length mRNA, and Western blotting, immunoprecipitation, and active-site labeling identified a population of capping enzymes in the cytoplasm of erythroid and nonerythroid cells. Cytoplasmic capping enzyme sediments in a 140-kDa complex that contains a kinase which, together with capping enzyme, converts 5'-monophosphate RNA into 5'-GpppX RNA. Capping enzyme shows diffuse and punctate staining throughout the cytoplasm, and its staining does not overlap with P bodies or stress granules. Expression of inactive capping enzyme in a form that is restricted to the cytoplasm reduced the ability of cells to recover from oxidative stress, thus supporting a role for capping in the cytoplasm and suggesting that some mRNAs may be stored in an uncapped state.