In yeast, the 3′ end of mature 18S rRNA is generated by endonucleolytic cleavage of the 20S precursor at site D. Available data indicate that the major cis-acting elements required for this processing step are located in relatively close proximity to the cleavage site. To identify these elements, we have studied the effect of mutations in the mature 18S and ITS1 sequences neighboring site D on pre-rRNA processing in vivo. Using clustered point mutations, we found that alterations in the sequence spanning site D from position −5 in 18S rRNA to +6 in ITS1 reduced the efficiency of processing at this site to different extents as demonstrated by the lower level of the mature 18S rRNA and the increase in 20S pre-rRNA in cells expressing only mutant rDNA units. More detailed analysis revealed an important role for the residue located 2 nt upstream from site D (position −2), whereas sequence changes at position −1, +1, and +2 relative to site D had no effect. The data further demonstrate that the proposed base pairing between the 3′ end of 18S rRNA and the 5′ end of ITS1 is not important for efficient and accurate processing at site D, nor for the formation of functional 40S ribosomal subunits. These results were confirmed by analyzing the accumulation of the D-A2 fragment derived from the mutant 20S pre-rRNA in cells that lack the Xrn1p exonuclease responsible for its degradation. The latter results also showed that the accuracy of cleavage was affected by altering the spacer sequence directly downstream of site D but not by mutations in the 18S rRNA sequence preceding this site.