We have identified an RNA-specific adenosine deaminase (termed Tad1p/scADAT1) from Saccharomyces cerevisiae that selectively converts adenosine at position 37 of eukaryotic tRNAAla to inosine. The activity of purified recombinant Tad1p depends on the conformation of its tRNA substrate and the enzyme was found to be inactive on all other types of RNA tested. Mutant strains in which the TAD1 gene is disrupted are viable but lack Tad1p enzyme activity and their tRNAAla is not modified at position A37. Transformation of the mutant cells with the TAD1 gene restored enzyme activity. Tad1p has significant sequence similarity with the mammalian editing enzymes which act on specific precursor-mRNAs and on long double-stranded RNA. These findings suggest an evolutionary link between pre-mRNA editing and tRNA modification.