A major pathway of eukaryotic messenger RNA (mRNA) turnover begins with deadenylation, followed by decapping and 5' to 3' exonucleolytic decay. We provide evidence that mRNA decapping and 5' to 3' degradation occur in discrete cytoplasmic foci in yeast, which we call processing bodies (P bodies). First, proteins that activate or catalyze decapping are concentrated in P bodies. Second, inhibiting mRNA turnover before decapping leads to loss of P bodies; however, inhibiting turnover at, or after, decapping, increases the abundance and size of P bodies. Finally, mRNA degradation intermediates are localized to P bodies. These results define the flux of mRNAs between polysomes and P bodies as a critical aspect of cytoplasmic mRNA metabolism and a possible site for regulation of mRNA degradation.