A nucleolar 2'-O-methyltransferase, partially purified from isolated mouse nucleoli, catalyzes the methylation of each of the four nucleosides, although to different levels depending on the RNA substrate. Similar to most methyltransferases which use S-adenosyl-L-methionine (SAM) as the methyl donor, the nucleolar 2'-O-methyltransferase was shown to bind S-adenosyl-L-homocysteine (SAH) (Kd = 0.17 microM), a product of the transfer reaction, as tightly as SAM (Kd = 0.24 microM). Binding assays also demonstrated stereospecificity about the sulfonium center of SAM. The naturally occurring S-chiral form of SAM had a 10-fold higher binding affinity than the R-chiral form. In addition, the alpha-amino group of the methionine moiety and the 6-amino group of the adenine moiety were shown to be required for maximal binding. The relative high affinity for both SAM and SAH may reflect a mechanism by which ribosome biogenesis is, in part, coordinated with cell growth, since a decrease in SAM:SAH ratio correlates with decreasing levels of 2'-O-methylation. The availability of unmethylated, in vitro-derived rRNA transcripts has made it possible to explore questions relating to the specificity for the RNA substrate. Using an in vitro-derived 28S rRNA transcript, the enzyme selectively methylated the sequence AmGmCm that occurs in a single-stranded bridge spanning two highly conserved structural domains of 28S rRNA. These results demonstrated that the purified nucleolar 2'-O-methyltransferase was sufficient to accurately methylate this region of 28S rRNA, and were taken to support the involvement of this nucleolar enzyme in the posttranscriptional methylation of the 47S precursor ribosomal RNA transcript.(ABSTRACT TRUNCATED AT 250 WORDS)