In yeast, the 5′ end of the mature 18S rRNA is generated by endonucleolytic cleavage at site A1, the position of which is specified by two distinct signals. An evolutionarily conserved sequence immediately upstream of the cleavage site has previously been shown to constitute one of these signals. We report here that a conserved stem-loop structure within the 5′ region of the 18S rRNA is recognized as a second positioning signal. Mutations predicted to either extend or destabilize the stem inhibited the normal positioning of site A1 from within the 18S rRNA sequence, as did substitution of the loop nucleotides. In addition, these mutations destabilized the mature 18S rRNA, indicating that recognition of the stem-loop structure is also required for 18S rRNA stability. Several mutations tested reduced the efficiency of pre-rRNA cleavage at site A1. There was, however, a poor correlation between the effects of the different mutations on the efficiency of cleavage and on the choice of cleavage site, indicating that these involve recognition of the stem-loop region by distinct factors. In contrast, the cleavages at sites A1 and A2 are coupled and the positioning signals appear to be similar, suggesting that both cleavages may be carried out by the same endonuclease.