Accurate and efficient processing of pre-rRNA is critical to the accumulation of mature functional ribosomal subunits for maintenance of cell growth. Processing requires numerous factors which act in trans as well as RNA sequence/structural elements which function in cis. To examine the latter, we have used directed mutagenesis and expression of mutated pre-rRNAs in yeast. Specifically, we tested requirements for formation of an ITS2-proximal stem on processing, a structure formed by an interaction between sequences corresponding to the 3′ end of 5.8S rRNA and the 5′ end of 25S. Pre-rRNA processing is inhibited in templates encoding mutations that prevent the formation of the ITS2-proximal stem. Compensatory, double mutations, which alter the sequence of this region but restore the structure of the stem, also restore processing, although at lower efficiency. This reduction in efficiency is reflected in decreased levels of mature 5.8S and 25S rRNA and increased levels of 35S pre-rRNA and certain processing intermediates. This phenotype is reminiscent of the biochemical depletion of U8 snoRNA in vertebrates for which the ITS2-proximal stem has been proposed as a potential site for interaction with U8 RNP. Thus, formation of the ITS2-proximal stem may be a requirement common to yeast and vertebrate pre-rRNA processing.