Depletion of any of the essential Lsm proteins, Lsm2-5p or Lsm8p, delayed pre-rRNA processing and led to the accumulation of many aberrant processing intermediates, indicating that an Lsm complex is required to maintain the normally strict order of processing events. In addition, high levels of degradation products derived from both precursors and mature rRNAs accumulated in Lsm-depleted strains. Depletion of the essential Lsm proteins reduced the apparent processivity of both 5' and 3' exonuclease activities involved in 5.8S rRNA processing, and the degradation intermediates that accumulated were consistent with inefficient 5' and 3' degradation. Many, but not all, pre-rRNA species could be coprecipitated with tagged Lsm3p, but not with tagged Lsm1p or non-tagged control strains, suggesting their direct interaction with an Lsm2-8p complex. We propose that Lsm proteins facilitate RNA protein interactions and structural changes required during ribosomal subunit assembly.