The RNA helicase p54 (DDX6, Dhh1, Me31B, Cgh-1, RCK) is a prototypic component of P-(rocessing) bodies in cells ranging from yeast to human. Previously, we have shown that it is also a component of the large cytoplasmic polyadenylation element-binding protein translation repressor complex in Xenopus oocytes and that when tethered to the 3' untranslated region, Xp54 represses reporter mRNA translation. Here, we examine the role of the p54 helicase activity in translational repression and in P-body formation. Mutagenesis of conserved p54 helicase motifs activates translation in the tethered function assay, reduces accumulation of p54 in P-bodies in HeLa cells, and inhibits its capacity to assemble P-bodies in p54-depleted cells. Similar results were obtained in four helicase motifs implicated in ATP binding and in coupling ATPase and RNA binding activities. This is accompanied by changes in the interaction of the mutant p54 with the oocyte repressor complex components. Surprisingly, the C-terminal D2 domain alone is sufficient for translational repression and complete accumulation in P-bodies, although it is deficient for P-body assembly. We propose a novel RNA helicase model, in which the D2 domain acts as a protein binding platform and the ATPase/helicase activity allows protein complex remodeling that dictates the balance between repressors and an activator of translation.