Processing bodies (P-bodies) have emerged as important subcellular structures that are involved in mRNA metabolism. To date, a detailed description of P-bodies in Drosophila oogenesis is lacking. To this end, we first demonstrate that Drosophila decapping protein 2 (dDcp2) contains intrinsic decapping activity and its enzymatic activity was not detectably enhanced by Drosophila decapping protein 1 (dDcp1). dDcp1-containing bodies in the nurse cell cytoplasm can associate with the 5' to 3' exoribonuclease, Pacman in addition to dDcp2 and Me31B. The size and number of dDcp1 bodies are dynamic and dramatically increased in dDcp2 and pacman mutant backgrounds supporting the conclusion that dDcp1 bodies in nurse cell cytoplasm are Drosophila P-bodies. In stage 2-6 oocytes, dDcp1 bodies appear to be distinct from previously characterized P-bodies since they are insensitive to cycloheximide and RNase A treatments. Curiously, dDcp2 and Pacman do not colocalize with dDcp1 at the posterior end of the oocyte in stage 9-10 oocytes. This suggests that dDcp1 bodies are in a developmentally distinct state separate from the 5' end mRNA degradation enzymes at later stages in the oocyte. Interestingly, re-formation of maternally expressed dDcp1 with dDcp2 and Pacman was observed in early embryogenesis. With respect to developmental switching, the maternal dDcp1 is proposed to serve as a marker for the re-formation of P-bodies in early embryos. This also suggests that a regulated conversion occurs between maternal RNA granules and P-bodies from oogenesis to embryogenesis.