Hal2p is an enzyme that converts pAp (adenosine 3',5' bisphosphate), a product of sulfate assimilation, into 5' AMP and Pi. Overexpression of Hal2p confers lithium resistance in yeast, and its activity is inhibited by submillimolar amounts of Li+ in vitro. Here we report that pAp accumulation in HAL2 mutants inhibits the 5'-->3' exoribonucleases Xrn1p and Rat1p. Li+ treatment of a wild-type yeast strain also inhibits the exonucleases, as a result of pAp accumulation due to inhibition of Hal2p; 5' processing of the 5.8S rRNA and snoRNAs, degradation of pre-rRNA spacer fragments and mRNA turnover are inhibited. Lithium also inhibits the activity of RNase MRP by a mechanism which is not mediated by pAp. A mutation in the RNase MRP RNA confers Li+ hypersensitivity and is synthetically lethal with mutations in either HAL2 or XRN1. We propose that Li+ toxicity in yeast is due to synthetic lethality evoked between Xrn1p and RNase MRP. Similar mechanisms may contribute to the effects of Li+ on development and in human neurobiology.