The PRP38 gene of Saccharomyces cerevisiae is necessary for the excision of intron sequences from pre-mRNA and required for the maintenance of maximal levels of U6 small nuclear RNA (snRNA). This report describes the identification of a gene of related function, SMD1, located immediately 3' to PRP38. The PRP38 and SMD1 transcription units are configured in an unusual "tail-to-tail" arrangement with their respective open reading frames terminating on opposite strands of a common 6-bp region. The predicted SMD1 polypeptide, Smd1p, is 40% identical to the D1 protein of human small nuclear ribonucleoprotein particles. Experimentally induced depletion of Smd1p blocks the first step of splicing and results in growth arrest. In addition, the levels of the trimethylguanosine-capped spliceosomal snRNAs, U1, U2, U4, and U5, but not the Prp38p-sensitive U6 snRNA, decrease in response to Smd1p depletion. The cap structures of snRNAs persisting in the absence of SMD1 expression appear to be peculiar, as they are poorly recognized by an anti-trimethylguanosine antibody. These data establish Smd1p as a required component of the cellular splicing apparatus and a factor in snRNA maturation and stability.