Replication-associated histone genes encode the only metazoan mRNAs that lack polyA tails, ending instead in a conserved 26-nt sequence that forms a stem-loop. Most of the regulation of mammalian histone mRNA is posttranscriptional and mediated by this unique 3' end. Stem-loop-binding protein (SLBP) binds to the histone mRNA 3' end and is thought to participate in all aspects of histone mRNA metabolism, including cell cycle regulation. To examine SLBP function genetically, we have cloned the gene encoding Drosophila SLBP (dSLBP) by a yeast three-hybrid method and have isolated mutations in dSLBP. dSLBP function is required both zygotically and maternally. Strong dSLBP alleles cause zygotic lethality late in development and result in production of stable histone mRNA that accumulates in nonreplicating cells. These histone mRNAs are cytoplasmic and have polyadenylated 3' ends like other polymerase II transcripts. Hypomorphic dSLBP alleles support zygotic development but cause female sterility. Eggs from these females contain dramatically reduced levels of histone mRNA, and mutant embryos are not able to complete the syncytial embryonic cycles. This is in part because of a failure of chromosome condensation at mitosis that blocks normal anaphase. These data demonstrate that dSLBP is required in vivo for 3' end processing of histone pre-mRNA, and that this is an essential function for development. Moreover, dSLBP-dependent processing plays an important role in coupling histone mRNA production with the cell cycle.