The product of the REF2 gene is required for optimal levels of endonucleolytic cleavage at the 3' ends of yeast mRNA, prior to the addition of a poly(A) tail. To test the role of the previously demonstrated nonspecific affinity of REF2 for RNA in this process, we have identified RNA binding mutants in vitro and tested them for function within the cell. One REF2 variant, with an internal deletion of 82 amino acids (269-350), displays a 10-fold reduction in RNA binding, yet still retains full levels of processing activity in vivo. Conversely, a series of carboxyl-terminal deletions that maintain full RNA binding capability have progressively decreasing activity. These results rule out a major role for the central RNA binding domain of REF2 in mRNA 3' end processing and demonstrate the importance of the carboxyl-terminal region. To ask if the stimulatory role of REF2 depends on interactions with other proteins, we used a two-hybrid screen to identify a new protein termed FIR1 (Factor Interacting with REF) encoded on chromosome V. FIR1 interacts with two independent regions of REF2, one of which (amino acids 268-345) overlaps the RNA binding domain and is dispensible for REF2 function, whereas the other (amino acids 391-533) is located within the critical carboxyl-terminus. As with REF2, FIR1 has a small but detectable role in influencing the efficiency of poly(A) site use. Yeast strains containing a disrupted FIR1 gene are slightly less efficient in the use of cryptic poly(A) sites located within the lacZ portion of an ACT1-lacZ reporter construct. Likewise, a double delta ref2, delta fir1 mutant is more defective in processing of a reporter CYC1 poly(A) site than delta ref2 alone. This synergistic response provides additional support for the interaction of FIR1 with REF2 in vivo, and suggests that a number of gene products may be involved in regulating the cleavage reaction in yeast.