M1 RNA, the catalytic subunit of RNase P from Escherichia coli, is transcribed in vivo as a precursor with extra nucleotides at the 3' end. Although it was suggested previously that RNase E is not responsible for the 3' processing of M1 RNA, we show that RNase E is the enzyme responsible for this reaction. At nonpermissive temperatures, the 3' processing of M1 RNA is abolished in a temperature-sensitive strain of E. coli that harbors a mutation in the gene for RNase E. Enhanced processing of M1 RNA is correlated with the overproduction of RNase E in vivo and processing is also correlated with the activity of this enzyme during the course of its purification. The biosynthesis of mature M1 RNA can proceed from transcripts that are produced under the control of a proximal promoter, as well as from a distal, upstream promoter. Transcription from the distal promoter results in a polycistronic transcript that includes four open reading frames and the transcript of rnpB, the gene coding for M1 RNA. The enzymatic activity that removes the 5' nucleotides from the precursor to M1 RNA is not due to RNase E, RNase P, or RNase III alone.