Transcription and mRNA processing are regulated by phosphorylation and dephosphorylation of the C-terminal domain (CTD) of RNA polymerase II, which consists of tandem repeats of a Y 1 S 2 P 3 T 4 S 5 P 6 S 7 heptapeptide. Previous studies showed that members of the plant CTD phosphatase-like (CPL) protein family differentially regulate osmotic stress-responsive and abscisic acidresponsive transcription in Arabidopsis thaliana. Here we report that AtCPL1 and AtCPL2 specifically dephosphorylate Ser-5 of the CTD heptad in Arabidopsis RNA polymerase II, but not Ser-2. An N-terminal catalytic domain of CPL1, which suffices for CTD Ser-5 phosphatase activity in vitro, includes a signature DXDXT acylphosphatase motif, but lacks a breast cancer 1 CTD, which is an essential component of the fungal and metazoan Fcp1 CTD phosphatase enzymes. The CTD of CPL1, which contains two putative doublestranded RNA binding motifs, is essential for the in vivo function of CPL1 and includes a C-terminal 23-aa signal responsible for its nuclear targeting. CPL2 has a similar domain structure but contains only one double-stranded RNA binding motif. Combining mutant alleles of CPL1 and CPL2 causes synthetic lethality of the male but not the female gametes. These results indicate that CPL1 and CPL2 exemplify a unique family of CTD Ser-5-specific phosphatases with an essential role in plant growth and development.T ranscriptional induction of genes that encode stress tolerance determinants is an integral part of the survival strategy of plants in adverse environments. The Arabidopsis thaliana responsive to dehydration (RD) genes are prototypal outputs of stress signal integration activated by low temperature, hyperosmolarity, and the plant hormone abscisic acid (ABA). The stress-inducible promoter of the RD29a gene contains dehydration͞cold-responsive elements and ABA-responsive elements that are the targets of distinct families of DNA binding transcription factors (1, 2). The plant stress response is also regulated by proteins that impact the core RNA polymerase II (Pol II) transcriptional machinery, the mRNA maturation process, and chromatin structure (3-9). Analysis of Arabidopsis mutants that display hyperinduction of RD29a expression under stress conditions have identified a family of C-terminal domain (CTD) phosphatase-like (CPL) genes that negatively regulate stressresponsive transcription (5, 6). The CPL1 and CPL3 genes discovered in the screen for hyperinduction are so named because they encode large polypeptides (967 and 1,241 aa, respectively) with local primary structure similarity to the Fcp1 family of fungal and metazoan protein serine phosphatases, which regulate transcription by dephosphorylating the CTD of the largest subunit of RNA Pol II (10).The Pol II CTD is composed of a tandemly repeated heptapeptide of consensus sequence Y . The number of CTD heptad repeats varies widely among species and correlates roughly with evolutionary complexity; e.g., mammals have 52 repeats, Drosophila has 42 repeats, fission yeast Schizosacc...