Members of the (L)Sm (Sm and Sm-like) protein family are found across all kingdoms of life and play crucial roles in RNA metabolism. The P-body component EDC3 (enhancer of decapping 3) is a divergent member of this family that functions in mRNA decapping. EDC3 is composed of a N-terminal LSm domain, a central FDF domain, and a C-terminal YjeF-N domain. We show that this modular architecture enables EDC3 to interact with multiple components of the decapping machinery, including DCP1, DCP2, and Me31B. The LSm domain mediates DCP1 binding and P-body localization. We determined the three-dimensional structures of the LSm domains of Drosophila melanogaster and human EDC3 and show that the domain adopts a divergent Sm fold that lacks the characteristic N-terminal ␣-helix and has a disrupted 4-strand. This domain remains monomeric in solution and lacks several features that canonical (L)Sm domains require for binding RNA. The structures also revealed a conserved patch of surface residues that are required for the interaction with DCP1 but not for P-body localization. The conservation of surface and of critical structural residues indicates that LSm domains in EDC3 proteins adopt a similar fold that has separable novel functions that are absent in canonical (L)Sm proteins.Proteins of the Sm and Sm-like family [conjointly referred to as (L)Sm proteins] are found in all domains of life and play important roles in RNA processing and decay (reviewed in references 21 and 46). They share the Sm fold, which comprises an N-terminal ␣-helix stacked on top of a strongly bent, five-stranded antiparallel -sheet, which forms a barrel-like structure. The fold can be divided into two segments corresponding to the highly conserved Sm1 and Sm2 motifs, where Sm1 comprises -strands 1 to 3 (1-3) and Sm2 comprises -strands 4 and 5 (4-5). The two motifs are joined by a nonconserved linker (L4) of variable length (18,20,34) (see Fig. 4 and 5).The (L)Sm domains often oligomerize to form hexameric or heptameric rings that stably or transiently bind single-stranded RNA. The major contacts between the subunits of the ring are mediated by antiparallel interactions between the backbones of strand 4 of one subunit and strand 5 of the adjacent subunit. RNA binding is mediated mainly by residues in loops between strands 2 and 3 and between strands 4 and 5 (loops L3 and L5, respectively), which face the lumen of the ring (7,20,26,33,40,41).The eubacterial and archaeal genomes encode from one to three (L)Sm paralogs that form homohexameric or homoheptameric rings, while eukaryotes encode more than eighteen (L)Sm paralogs that assemble into heteroheptameric rings of different composition and function (reviewed in references 1, 2, 21, and 46).Seven of the eukaryotic proteins (SmB, SmD1, SmD2, SmD3, SmE, SmF, and SmG) form a ring that stably associates with RNA polymerase II-transcribed uridine-rich small nuclear RNAs (i.e., U1, U2, U4, and U5), and functions in uridine-rich snRNP biogenesis and mRNA splicing (18,21,34,46). In addition to the S...