The characterization of a novel yeast-splicing factor, Luc7p, is presented. The LUC7 gene was identified by a mutation that causes lethality in a yeast strain lacking the nuclear cap-binding complex (CBC). Luc7p is similar in sequence to metazoan proteins that have arginine-serine and arginine-glutamic acid repeat sequences characteristic of a family of splicing factors. We show that Luc7p is a component of yeast U1 snRNP and is essential for vegetative growth. The composition of yeast U1 snRNP is altered in luc7 mutant strains. Extracts of these strains are unable to support any of the defined steps of splicing unless recombinant Luc7p is added. Although the in vivo defect in splicing wild-type reporter introns in a luc7 mutant strain is comparatively mild, splicing of introns with nonconsensus 5' splice site or branchpoint sequences is more defective in the mutant strain than in wild-type strains. By use of reporters that have two competing 5' splice sites, a loss of efficient splicing to the cap proximal splice site is observed in luc7 cells, analogous to the defect seen in strains lacking CBC. CBC can be coprecipitated with U1 snRNP from wild-type, but not from luc7, yeast strains. These data suggest that the loss of Luc7p disrupts U1 snRNP-CBC interaction, and that this interaction contributes to normal 5' splice site recognition.