The mechanism of action of purified wheat germ RNA ligase has been examined. ATP was absolutely required for the ligation of substrates containing 5'-OH or 5'-P and 2',3'-cyclic P or 2'-P termini. Ligation of 1 mol of 5'-P-2',3'-cyclic P-terminated poly(A) was accompanied by the hydrolysis of 1 mol of ATP to 1 mol each of AMP and PPi. Purified RNA ligase catalyzed an ATP-PPi exchange reaction, specific for ATP and dATP, and formed a covalent enzyme-adenylate complex that was detected by autoradiography following incubation with [alpha-32P]ATP and separation of the products by sodium dodecyl sulfate-polyacrylamide gel electrophoresis. A protein doublet with a molecular weight of approximately 110 kDa, the major product detected by silver staining, was labeled in these reactions. Isolated E-AMP complex was dissociated by the addition of ligatable poly(A), containing 5'-P-2',3'-cyclic P termini, to yield AMP and by the addition of PPi to yield ATP. The unique feature of the reactions leading to an exchange reaction between ATP and PPi and to the formation of an E-AMP complex was their marked stimulation (up to 400-fold) by the addition of RNA. This property distinguishes the wheat germ RNA ligase from other known RNA and DNA ligases which catalyze ATP-PPi exchange reactions and form E-AMP complexes in the absence of substrate. Thus, RNA appears to function in two capacities in the wheat germ system as a cofactor, to stimulate the reaction of the enzyme with ATP, and as an authentic substrate for ligation.