Box H/ACA small nucleolar ribonucleoprotein particles (H/ACA snoRNPs) play key roles in the synthesis of eukaryotic ribosomes. How box H/ACA snoRNPs are assembled remains unknown. Here we show that yeast Nhp2p, a core component of these particles, directly binds RNA. In vitro, Nhp2p interacts with high affinity with RNAs containing irregular stem-loop structures but shows weak affinity for poly(A), poly(C) or for double-stranded RNAs. The central region of Nhp2p is believed to function as an RNA-binding domain, since it is related to motifs found in various RNA-binding proteins. Removal of two amino acids that shortens a putative beta-strand element within Nhp2p central domain impairs the ability of the protein to interact with H/ACA snoRNAs in cell extracts. In vivo, this deletion prevents cell viability and leads to a strong defect in the accumulation of H/ACA snoRNAs and Gar1p. These data suggest that proper direct binding of Nhp2p to H/ACA snoRNAs is required for the assembly of H/ACA snoRNPs and hence for the stability of some of their components. In addition, we show that converting a highly conserved glycine residue (G(59)) within Nhp2p central domain to glutamate significantly reduces cell growth at 30 and 37 degrees C. Remarkably, this modification affects the steady-state levels of H/ACA snoRNAs and the strength of Nhp2p association with these RNAs to varying degrees, depending on the nature of the H/ACA snoRNA. Finally, we show that the modified Nhp2p protein whose interaction with H/ACA snoRNAs is impaired cannot accumulate in the nucleolus, suggesting that only the assembled H/ACA snoRNP particles can be efficiently retained in the nucleolus.