The RNA component of signal recognition particle (SRP) is transcribed by RNA polymerase III, and most steps in SRP biogenesis occur in the nucleolus. Here, we examine processing and quality control of the yeast SRP RNA (scR1). In common with other pol III transcripts, scR1 terminates in a U-tract, and mature scR1 retains a U4-5 sequence at its 3' end. In cells lacking the exonuclease Rex1, scR1 terminates in a longer U5-6 tail that presumably represents the primary transcript. The 3' U-tract of scR1 is protected from aberrant processing by the La homologue, Lhp1 and overexpressed Lhp1 apparently competes with both the RNA surveillance system and SRP assembly factors. Unexpectedly, the TRAMP and exosome nuclear RNA surveillance complexes are also implicated in protecting the 3' end of scR1, which accumulates in the nucleolus of cells lacking the activities of these complexes. Misassembled scR1 has a primary degradation pathway in which Rrp6 acts early, followed by TRAMP-stimulated exonuclease degradation by the exosome. We conclude that the RNA surveillance machinery has key roles in both SRP biogenesis and quality control of the RNA, potentially facilitating the decision between these alternative fates.