Translation and messenger RNA (mRNA) degradation are important sites of gene regulation, particularly during stress where translation and mRNA degradation are reprogrammed to stabilize bulk mRNAs and to preferentially translate mRNAs required for the stress response. During stress, untranslating mRNAs accumulate both in processing bodies (P-bodies), which contain some translation repressors and the mRNA degradation machinery, and in stress granules, which contain mRNAs stalled in translation initiation. How signal transduction pathways impinge on proteins modulating P-body and stress granule formation and function is unknown. We show that during stress in Saccharomyces cerevisiae, Dcp2 is phosphorylated on serine 137 by the Ste20 kinase. Phosphorylation of Dcp2 affects the decay of some mRNAs and is required for Dcp2 accumulation in P-bodies and specific protein interactions of Dcp2 and for efficient formation of stress granules. These results demonstrate that Ste20 has an unexpected role in the modulation of mRNA decay and translation and that phosphorylation of Dcp2 is an important control point for mRNA decapping.