Very few of the enzymes required for eukaryotic precursor ribosomal RNA (pre-rRNA) processing have been identified. Ribonuclease (RNase) MRP was characterized as a nuclease that cleaves mitochondrial replication primers, but it is predominantly nucleolar. Previous genetic evidence revealed that this ribonucleoprotein is required, directly or indirectly, for cleavage of the yeast pre-rRNA in vivo at site A3. Here, an in vitro processing system that accurately reproduces this cleavage is described. Biochemical purification and the use of extracts depleted of the MRP RNA demonstrate that endonucleolytic cleavage of the pre-rRNA is directly mediated by RNase MRP. This establishes a role for RNase MRP in the nucleolus.