For successful chromosome segregation during mitosis, several processes must occur early in the cell cycle, including spindle pole duplication, DNA replication, and the establishment of cohesion between nascent sister chromatids. Spindle pole body duplication begins in G1 and continues during early S-phase as spindle pole bodies mature and start to separate. Key steps in spindle pole body duplication are the sequential recruitment of Cdc31p and Spc42p by the nuclear envelope transmembrane protein Msp3p/Nep98p (herein termed Mps3p). Concurrent with DNA replication, Ctf7p/Eco1p (herein termed Ctf7p) ensures that nascent sister chromatids are paired together, identifying the products of replication as sister chromatids. Here, we provide the first evidence that the nuclear envelope spindle pole body assembly component Mps3p performs a function critical to sister chromatid cohesion. Mps3p was identified as interacting with Ctf7p from a genome-wide two-hybrid screen, and the physical interaction was confirmed by both in vivo (co-immunoprecipitation) and in vitro (GST pull-down) assays. An in vivo cohesion assay on new mps3/nep98 alleles revealed that loss of Mps3p results in precocious sister chromatid separation and that Mps3p functions after G1, coincident with Ctf7p. Mps3p is not required for cohesion during mitosis, revealing that Mps3p functions in cohesion establishment and not maintenance. Mutated Mps3p that results in cohesion defects no longer binds to Ctf7p in vitro, demonstrating that the interaction between Mps3p and Ctf7p is physiologically relevant. In support of this model, mps3 ctf7 double mutant cells exhibit conditional synthetic lethality. These findings document a new role for Mps3p in sister chromatid cohesion and provide novel insights into the mechanism by which a spindle pole body component, when mutated, contributes to aneuploidy.