mRNAs that contain premature stop codons are degraded selectively and rapidly in eukaryotes, a phenomenon termed 'nonsense-mediated mRNA decay' (NMD). We report here molecular analysis of smg-5, which encodes a novel protein required for NMD in Caenorhabditis elegans. Using a combination of immunoprecipitation and yeast two-hybrid assays, we identified a series of protein-protein interactions involving SMG-5. SMG-5 interacts with at least four proteins: (i) SMG-7, a previously identified protein required for NMD; (ii) SMG-2, a phosphorylated protein required for NMD in worms, yeasts and mammals; (iii) PR65, the structural subunit of protein phosphatase 2A (PP2A); and (iv) PP2A(C), the catalytic subunit of PP2A. Previous work demonstrated that both SMG-5 and SMG-7 are required for efficient dephosphorylation of SMG-2. Our results suggest that PP2A is the SMG-2 phosphatase, and the role of SMG-5 is to direct PP2A to its SMG-2 substrate. We discuss cycles of SMG-2 phosphorylation and their roles in NMD.