In this study we identified Pdc2, the fission yeast ortholog of human Pat1b protein, which forms complex with Lsm1-7 and plays a role in coupling deadenylation and decapping. The involvement of Pdc2 in RNA degradation and P-body function were also determined. We found that Pdc2 interacts with Dcp2 and is required for decapping in vivo. Although not absolutely essential for P-bodies assembly, over-expression of Pdc2 enhanced P-body formation even in the absence of Pdc1, the fission yeast functional homologue of human Edc4 protein, indicating that Pdc2 also plays a role in P-body formation. Intriguingly, in the absence of Pdc2, Lsm1 was found to accumulate in the nucleus suggesting that Pdc2 shuttling between nucleus and cytoplasm plays a role in decreasing the nuclear concentration of Lsm1 to increase Lsm1 in the cytoplasm. Furthermore, unlike other components of P-bodies, the deadenylase Ccr4 did not accumulate in P-bodies in cells growing under favorable conditions and was only recruited to P-bodies after deprivation of glucose in a Pdc2-Lsm1 dependent manner, indicating a function of Pdc2 in cellular response to environmental stress. In supporting this idea, pdc2 mutants are defective in recovery from glucose starvation with much longer time to re-enter cell cycle. In keeping with the notion that Pat1 is a nucleocytoplasmic protein, functioning also in the nucleus, we found that Pdc2 physically and genetically interacts with the nuclear 5'-3' exonuclease Dhp1. A function of Pdc2-Lsm1, in concert with Dhp1, regulating RNA by promoting its decapping/destruction in the nucleus was suggested.