Almost all small eukaryotic RNAs are processed from transiently stabilized 3'-extended forms, A key question is how and why such intermediates are stabilized and how they can then be processed to the mature RNA. Here,ve report that yeast U3 is also processed from a 3'-extended precursor, The major 3'-extended farms of U3 (U3-3'I and -II) lack the cap trimethylation present in mature U3 and are not associated with small nucleolar RNP (snoRNP) proteins that bind mature U3, i.e., Nop1p, Nop56p, and Nop58p, Depletion of Nop58p leads to the loss of mature U3 but increases the level of U3-3'I and -II, indicating a requirement for the snoRNP proteins for final maturation. Pre-U3 is cleaved by the endonuclease Rnt1p, but U3-3'I and -II do not extend to the Rnt1p cleavage sites. Rather, they terminate at poly(U) tracts, suggesting that they might be bound by Lhp1p (the yeast homologue of La). Immunoprecipitation of Lhp1p fused to Staphylococcus aureus protein A resulted in coprecipitation of both U3-3'I and -II. Deletion of LHP1, which is nonessential, led to the loss of U3-3'I and -II, We conclude that pre-U3 is cleaved by Rnt1p, followed by exonuclease digestion to U3-3'I and -II, These species are stabilized against continued degradation by binding of Lhp1p. Displacement of Lhp1p by binding of the snoRNP proteins allows final maturation, which involves the exosome complex of 3'--> 25' exonucleases.