Small nuclear RNAs (snRNAs) are core spliceosome components and mediate pre-mRNA splicing. Here we show that snRNAs contain a regulated and reversible nucleotide modification causing them to exist as two different methyl isoforms, m1 and m2, reflecting the methylation state of the adenosine adjacent to the snRNA cap. We find that snRNA biogenesis involves the formation of an initial m1 isoform with a single-methylated adenosine (2'-O-methyladenosine, Am), which is then converted to a dimethylated m2 isoform (N6,2'-O-dimethyladenosine, m6Am). The relative m1 and m2 isoform levels are determined by the RNA demethylase FTO, which selectively demethylates the m2 isoform. We show FTO is inhibited by the oncometabolite D-2-hydroxyglutarate, resulting in increased m2-snRNA levels. Furthermore, cells that exhibit high m2-snRNA levels show altered patterns of alternative splicing. Together, these data reveal that FTO controls a previously unknown central step of snRNA processing involving reversible methylation, and suggest that epitranscriptomic information in snRNA may influence mRNA splicing.