The flavivirus RNA genome contains a conserved cap-1 structure, (7Me)GpppA(2'OMe)G, at the 5' end. Two mRNA cap methyltransferase (MTase) activities involved in the formation of the cap, the (guanine-N7)- and the (nucleoside-2'O)-MTases (2'O-MTase), reside in a single domain of non-structural protein NS5 (NS5MTase). This study reports on the biochemical characterization of the 2'O-MTase activity of NS5MTase of dengue virus (NS5MTase(DV)) using purified, short, capped RNA substrates ((7Me)GpppAC(n) or GpppAC(n)). NS5MTase(DV) methylated both types of substrate exclusively at the 2'O position. The efficiency of 2'O-methylation did not depend on the methylation of the N7 position. Using (7Me)GpppAC(n) and GpppAC(n) substrates of increasing chain lengths, it was found that both NS5MTase(DV) 2'O activity and substrate binding increased before reaching a plateau at n=5. Thus, the cap and 6 nt might define the interface providing efficient binding of enzyme and substrate. K(m) values for (7Me)GpppAC(5) and the co-substrate S-adenosyl-L-methionine (AdoMet) were determined (0.39 and 3.26 microM, respectively). As reported for other AdoMet-dependent RNA and DNA MTases, the 2'O-MTase activity of NS5MTase(DV) showed a low turnover of 3.25x10(-4) s(-1). Finally, an inhibition assay was set up and tested on GTP and AdoMet analogues as putative inhibitors of NS5MTase(DV), which confirmed efficient inhibition by the reaction product S-adenosyl-homocysteine (IC(50) 0.34 microM) and sinefungin (IC(50) 0.63 microM), demonstrating that the assay is sufficiently sensitive to conduct inhibitor screening and characterization assays.