The spliced leader-associated (SLA1) RNA is a trypanosome-specific small RNA with unknown function. SLA1 carries a Sm-like site, and is associated with core Sm proteins. Here we found that SLA1 belongs to a family of hairpin-containing RNAs that are implicated in directing pseudouridylation. A potential for base-pair interaction between SLA1 and spliced leader (SL) RNA agrees with the canonical rules for guiding pseudouridylation on SL RNA. Direct RNA analysis showed that this uridine is indeed pseudouridylated in the SL RNA of Leptomonas collosoma, Leishmania major, and Trypanosoma brucei. This position is conserved in all trypanosomatid SL RNAs. Mutations introduced in the SL RNA to disrupt the interaction domain of SLA1/SL RNA abolished the formation of the pseudouridine. SLA1 is localized both to the nucleolus and nucleoplasm. This study solves a long-standing question regarding the function of this novel RNA and describes the first H/ACA RNA, which, unlike all other pseudouridine guides, is also a bona fide snRNA.