A novel class of small nucleolar RNAs (snoRNAs), encoded in introns of protein coding genes and originating from processing of their precursor molecules, has recently been described. The L1 ribosomal protein (r-protein) gene of Xenopus laevis and its human homologue contain two snoRNAs, U16 and U18. It has been shown that these snoRNAs are excised from their intron precursors by endonucleolytic cleavage and that their processing is alternative to splicing. Two sequences, internal to the snoRNA coding region, have been identified as indispensable for processing the conserved boxes C and D. Competition experiments have shown that these sequences interact with diffusible factors which can bind both the pre-mRNA and the mature U16 snoRNA. Fibrillarin, which is known to associate with complexes formed on C and D boxes of other snoRNAs, is found in association with mature U16 RNA, as well as with its precursor molecules. This fact suggests that the complex formed on the pre-mRNA remains bound to U16 throughout all the processing steps. We also show that the complex formed on the C and D boxes is necessary to stabilize mature snoRNA.