Vaccinia virus capping enzyme, a heterodimer of 95-kDa and 33-kDa subunits, modifies the 5' RNA end and also acts as a transcription termination factor during synthesis of viral early mRNAs. Termination occurs in response to a specific signal, UUUUUNU, in the nascent RNA chain. We now report that purified capping enzyme binds to defined RNAs in solution to form complexes that are stable during native gel electrophoresis. Multiple enzyme molecules can bind to a single RNA. No particular 5' end structure is required for RNA binding, suggesting that the observed protein-RNA interaction is unrelated to the triphosphatase, guanylyltransferase, or methyltransferase functions of capping enzyme. Although binding does not require a UUUUUNU element in the RNA, complex formation is competed preferentially by poly(U) compared to poly(C). Capping enzyme binds to the synthetic 30-mer homopolymers to form a single protein-RNA complex; affinity for U-30 is 10-fold higher than for A-30. The sites of protein-RNA contact, as detected by UV cross-linking, are located predominantly within the 95-kDa capping enzyme subunit, which is itself sufficient to bind and cross-link to RNA in the absence of the small subunit.