Posttranscriptional, site-specific adenosine to inosine (A-to-I) base conversions, designated as RNA editing, play significant roles in generating diversity of gene expression. However, little is known about how and in which cellular compartments RNA editing is controlled. Interestingly, the two enzymes that catalyze RNA editing, adenosine deaminases that act on RNA (ADAR) 1 and 2, have recently been demonstrated to dynamically associate with the nucleolus. Moreover, we have identified a brain-specific small RNA, termed MBII-52, which was predicted to function as a nucleolar C/D RNA, thereby targeting an A-to-I editing site (C-site) within the 5-HT2C serotonin receptor pre-mRNA for 2'-O-methylation. Through the subcellular targeting of minigenes that contain natural editing sites, we show that ADAR2- but not ADAR1-mediated RNA editing occurs in the nucleolus. We also demonstrate that MBII-52 forms a bona fide small nucleolar ribonucleoprotein particle that specifically decreases the efficiency of RNA editing by ADAR2 at the targeted C-site. Our data are consistent with a model in which C/D small nucleolar RNA might play a role in the regulation of RNA editing.