The presence of 5-methyluridine (m5U) at position 54 is a ubiquitous feature of most bacterial and eukaryotic elongator tRNAs. In this study, we have identified and characterized the TRM2 gene that encodes the tRNA(m5U54)methyltransferase, responsible for the formation of this modified nucleoside in Saccharomyces cerevisiae. Transfer RNA isolated from TRM2-disrupted yeast strains does not contain the m5U54 nucleoside. Moreover, a glutathione S-transferase (GST) tagged recombinant, Trm2p, expressed in Escherichia coli displayed tRNA(m5U54)methyltransferase activity using as substrate tRNA isolated from a trm2 mutant strain, but not tRNA isolated from a TRM2 wild-type strain. In contrast to what is found for the tRNA(m5U54)methyltransferase encoding gene trmA+ in E. coli, the TRM2 gene is not essential for cell viability and a deletion strain shows no obvious phenotype. Surprisingly, we found that the TRM2 gene was previously identified as the RNC1/NUD1 gene, believed to encode the yNucR endo-exonuclease. The expression and activity of the yNucR endo-exonuclease is dependent on the RAD52 gene, and does not respond to increased gene dosage of the RNC1/NUD1 gene. In contrast, we find that the expression of a trm2-LacZ fusion and the activity of the tRNA(m5U54)methyltransferase is not regulated by the RAD52 gene and does respond on increased gene dosage of the TRM2 (RNC1/NUD1) gene. Furthermore, there was no nuclease activity associated with a GST-Trm2 recombinant protein. The purified yNucR endo-exonuclease has been reported to have an NH2-D-E-K-N-L motif, which is not found in the Trm2p. Therefore, we suggest that the yNucR endo-exonuclease is encoded by a gene other than TRM2.