The C-terminal domain (CTD) of the largest subunit of RNA polymerase II (Pol II) is a reiterated heptad sequence (Tyr1-Ser2-Pro3-Thr4-Ser5-Pro6-Ser7) that plays a key role in the transcription cycle, coordinating the exchange of transcription and RNA processing factors. The structure of the CTD is flexible and undergoes conformational changes in response to serine phosphorylation and proline isomerization. Here we report that the Ess1 peptidyl prolyl isomerase functionally interacts with the transcription initiation factor TFIIB and with the Ssu72 CTD phosphatase and Pta1 components of the CPF 3-end processing complex. The ess1 A144T and ess1 H164R mutants, initially described by Hanes and coworkers (Yeast 5:55-72, 1989), accumulate the pSer5 phosphorylated form of Pol II; confer phosphate, galactose, and inositol auxotrophies; and fail to activate PHO5, GAL10, and INO1 reporter genes. These mutants are also defective for transcription termination, but in vitro experiments indicate that this defect is not caused by altering the processing efficiency of the cleavage/polyadenylation machinery. Consistent with a role in initiation and termination, Ess1 associates with the promoter and terminator regions of the PMA1 and PHO5 genes. We propose that Ess1 facilitates pSer5-Pro6 dephosphorylation by generating the CTD structural conformation recognized by the Ssu72 phosphatase and that pSer5 dephosphorylation affects both early and late stages of the transcription cycle.The rigid cyclic structure of the amino acid proline restricts the flexibility of prolyl-containing polypeptides. Peptidyl proline can adopt either the cis or trans conformation, with dramatically different effects on protein secondary structure. Although prolyl cis-trans isomerization can occur spontaneously, uncatalyzed isomerization must overcome large energy of activation barriers (⌬G°), predicted to be 30 kcal ⅐ mol Ϫ1 for trans-to-cis conversion and experimentally determined to range from 14 to 24 kcal ⅐ mol Ϫ1 for cis-to-trans conversion (reviewed in references 32 and 33). Consequently, peptidyl prolyl isomerases (PPIases) have evolved to greatly accelerate the rates of rotation about the peptide bond preceding proline. Accordingly, PPIases are relevant not only for protein folding but also for regulation of dynamic cellular processes (33).PPIases fall into three distinct classes: cyclophilins, FK506 binding proteins, and the parvulins, which include mammalian Pin1 and its budding yeast (Saccharomyces cerevisiae) homolog, Ess1 (2). A unique feature of the Pin1 PPIase is its specific recognition of phosphorylated Ser/Thr-Pro sequences (pSer/ Thr-Pro) (44, 62). Cyclin-dependent protein kinases and type 2A protein phosphatases are specific for the trans isomer of pSer/Thr-Pro. Furthermore, phosphorylation of a Ser/Thr-Pro motif dramatically slows spontaneous prolyl isomerization and prevents other PPIases from working at this prolyl residue (57). Therefore, Pin1 can regulate signaling pathways by controlling the levels of kinase products and phosphat...