The Schizosaccharomyces pombe pac1 gene is a multicopy suppressor of the pat1 temperature-sensitive mutation, which directs uncontrolled meiosis at the restrictive temperature. Overexpression of the pac1 gene had no apparent effect on vegetative growth but inhibited mating and sporulation in wild type S. pombe cells. In such cells, expression of certain genes required for mating or meiosis was inhibited. The pac1 gene is essential for vegetative cell growth. The deduced pac1 gene product has 363 amino acids. Its C-terminal 230 residues revealed 25% amino acid identity with ribonuclease III, an enzyme that digests double-stranded RNA and is involved in processing ribosomal RNA precursors and certain mRNAs in Escherichia coli. The pac1 gene product could degrade double-stranded RNA in vitro. These observations establish the presence of a RNase III homolog in eukaryotic cells. The pac1 gene product probably inhibits mating and meiosis by degrading a specific mRNA(s) required for sexual development. It is likely that mRNA processing is involved in the regulation of sexual development in fission yeast.