Eukaryotic RNase P and RNase MRP are endoribonucleases composed of RNA and protein subunits. The RNA subunits of each enzyme share substantial secondary structural features, and most of the protein subunits are shared between the two. One of the conserved RNA subdomains, designated P3, has previously been shown to be required for nucleolar localization. Phylogenetic sequence analysis suggests that the P3 domain interacts with one of the proteins common to RNase P and RNase MRP, a conclusion strengthened by an earlier observation that the essential domain can be interchanged between the two enzymes. To examine possible functions of the P3 domain, four conserved nucleotides in the P3 domain of Saccharomyces cerevisiae RNase P RNA (RPR1) were randomized to create a library of all possible sequence combinations at those positions. Selection of functional genes in vivo identified permissible variations, and viable clones that caused yeast to exhibit conditional growth phenotypes were tested for defects in RNase P RNA and tRNA biosynthesis. Under nonpermissive conditions, the mutants had reduced maturation of the RPR1 RNA precursor, an expected phenotype in cases where RNase P holoenzyme assembly is defective. This loss of RPR1 RNA maturation coincided, as expected, with a loss of pre-tRNA maturation characteristic of RNase P defects. To test whether mutations at the conserved positions inhibited interactions with a particular protein, specific binding of the individual protein subunits to the RNA subunit was tested in yeast using the three-hybrid system. Pop1p, the largest subunit shared by RNases P and MRP, bound specifically to RPR1 RNA and the isolated P3 domain, and this binding was eliminated by mutations at the conserved P3 residues. These results indicate that Pop1p interacts with the P3 domain common to RNases P and MRP, and that this interaction is critical in the maturation of RNase P holoenzyme.