Decapping enzymes remove the five-primer cap of eukaryotic mRNA, leading to accelerated RNA decay. They are critical in regulating RNA homeostasis and play essential roles in many cellular and life processes. They are encoded in many organisms and viruses, including vaccinia virus, which was used as the vaccine to eradicate smallpox. Vaccinia virus encodes two decapping enzymes, D9 and D10, that are necessary for efficient viral replication and pathogenesis. However, the underlying molecular mechanism regulating vaccinia decapping enzyme functions is still largely elusive. Here we demonstrated that vaccinia D10 localized almost exclusively to mitochondria that are highly mobile cellular organelles, providing an innovative mechanism to concentrate D10 locally and mobilize it to efficiently decap mRNAs. As mitochondria were barely present in viral factories, where viral transcripts are produced, suggesting that mitochondrial localization provides a spatial mechanism to preferentially decap cellular mRNAs over viral mRNAs. We identified three amino acids responsible for D10 mitochondrial localization. Loss of mitochondrial localization significantly impaired viral replication, reduced D10 ability to resolve RNA five-primer cap aggregation during infection, diminished D10 gene expression shutoff and mRNA translation promotion abilities.