In eukaryotes, two distinct classes of small nucleolar RNAs (snoRNAs), namely the fibrillarin-associated box C/D snoRNAs and the Gar1p-associated box H/ACA snoRNAs, direct the site-specific 2'-O-ribose methylation and pseudouridylation of ribosomal RNAs (rRNAs), respectively. We have identified a novel evolutionarily conserved snoRNA, called U85, which possesses the box elements of both classes of snoRNAs and associates with both fibrillarin and Gar1p. In vitro and in vivo pseudouridylation and 2'-O-methylation experiments provide evidence that the U85 snoRNA directs 2'-O-methylation of the C45 and pseudouridylation of the U46 residues in the invariant loop 1 of the human U5 spliceosomal RNA. The U85 is the first example of a snoRNA that directs modification of an RNA polymerase II-transcribed spliceosomal RNA and that functions both in RNA pseudouridylation and 2'-O-methylation.