Core snRNP proteins bind snRNA through the conserved Sm site, PuA(U)n>/=3GPu. While yeast U1 snRNA has three matches to the Sm consensus, the U1 3'-terminal Sm site was found to be both necessary and sufficient for U1 function. Mutation of this site inhibited pre-mRNA splicing, blocked cell division and resulted in the accumulation of two 3'-extended forms of the U1 snRNA. Cells which harbor the Sm site mutation lack mature U1 RNA (U1alpha) but have a minor polyadenylated species, U1gamma, and a prominent, non-polyadenylated species, U1beta. Metabolic depletion of the essential Sm core protein, Smd1p, also resulted in the increased accumulation of U1beta and U1gamma. In vitro, synthetic U1 precursors were cleaved by Rnt1p (RNase III) very near the U1beta 3'-end observed in vivo. We propose that U1beta is an Rnt1p-cleaved intermediate and that U1 maturation to the U1alpha form occurs through an Sm-sensitive step. Interestingly, both U1alpha and a second, much longer RNA, U1straightepsilon, were produced in an rnt1 mutant strain. These results suggest that yeast U1 snRNA processing may progress through Rnt1p-dependent and Rnt1p-independent pathways, both of which require a fun-ctional Sm site for final snRNA maturation.