A newly recognized gamma herpesvirus known as Kaposi sarcoma-associated herpesvirus (KSHV) or human herpesvirus 8 (HHV8) is present in Kaposi sarcomas and body-cavity-based lymphomas. Here we identify a novel abundant 1.2-kb RNA, polyadenylated nuclear RNA (PAN RNA), encoded by the virus. The majority of cDNAs produced from poly(A)-selected RNA isolated from a human body cavity lymphoma cell line 48 hr after butyrate induction of KSHV lytic replication represented PAN RNA. Within PAN RNA were two 9 and 16 nt stretches with 89% and 94% identity to U1 RNA. A third stretch of 14 nt was 93% complementary to U1. The 5' upstream region of PAN RNA contained both proximal and distal sequence elements characteristic of regulatory regions of U snRNAs, whereas the 3' end was polyadenylylated. PAN RNA was transcribed by RNA polymerase II, lacked a trimethylguanosine cap, and did not associate with polyribosomes. PAN RNA formed a speckled pattern in the nucleus typical of U snRNAs and colocalized with Sm protein. Therefore, PAN represents a new type of RNA, possessing features of both U snRNA and mRNA.