Decapping by Dcp2 is an essential step in 5′-to-3′ mRNA decay. In yeast, decapping requires an open-to-closed transition in Dcp2, though the link between closure and catalysis remains elusive. Here we show using NMR that cap binds conserved residues on both the catalytic and regulatory domains of Dcp2. Lesions in the cap-binding site on the regulatory domain reduce the catalytic step by two orders of magnitude and block the formation of the closed state, whereas Dcp1 enhances the catalytic step by a factor of 10 and promotes closure. We conclude that closure occurs during the rate-limiting catalytic step of decapping, juxtaposing the cap-binding region of each domain to form a composite active site. This work suggests a model for regulation of decapping where coactivators trigger decapping by stabilizing a labile composite active site.