RNA capping and decapping tightly coordinate with transcription, translation, and RNA decay to regulate gene expression. Proteins in the DXO/Rai1 family have been implicated in mRNA decapping and decay, and mammalian DXO was recently found to also function as a decapping enzyme for NAD⁺ -capped RNAs (NAD-RNA). The Arabidopsis genome contains a single gene encoding a DXO/Rai1 protein, AtDXO1. Here we show that AtDXO1 possesses both NAD-RNA decapping activity and 5'-3' exonuclease activity but does not hydrolyze the m⁷ G cap. The atdxo1 mutation increased the stability of NAD-RNAs and led to pleiotropic phenotypes, including severe growth retardation, pale color, and multiple developmental defects. Transcriptome profiling analysis showed that the atdxo1 mutation resulted in upregulation of defense-related genes but downregulation of photosynthesis-related genes. The autoimmunity phenotype of the mutant could be suppressed by either eds1 or npr1 mutation. However, the various phenotypes associated with the atdxo1 mutant could be complemented by an enzymatically inactive AtDXO1. The atdxo1 mutation apparently enhances post-transcriptional gene silencing by elevating levels of siRNAs. Our study indicates that AtDXO1 regulates gene expression in various biological and physiological processes through its pleiotropic molecular functions in mediating RNA processing and decay.