Pseudouridine (psi) is commonly found in both small and large subunit ribosomal RNAs of prokaryotes and eukaryotes. In Escherichia coli small subunit RNA, there is only one psi, at position 516, in a region of the RNA known to be involved in codon recognition [Bakin et al. (1994) Nucleic Acids Res. 22, 3681-3684]. To assess the function of this single psi residue, the enzyme catalyzing its formation was purified and cloned. The enzyme contains 231 amino acids and has a calculated molecular mass of 25,836 Da. It converts U516 in E. coli 16S RNA transcripts into psi but does not modify any other position in this RNA. It does not react with free unmodified 16S RNA at all, and only poorly with 30S particles containing unmodified RNA. The preferred substrate is an RNA fragment from residues 1 to 678 which has been complexed with 30S ribosomal proteins. The yield varied from 0.6 to 1.0 mol of psi/mol of RNA, depending on the preparation. Free RNA(1-678) was inactive, as was RNA(1-526) and the RNP particle made from it. 23S RNA and tRNAVal transcripts were also inactive. These results suggest that psi formation in vivo occurs at an intermediate stage of 30S assembly. The gene is located at 47.1 min immediately 5' to, and oriented in the same direction as, the bicyclomycin resistance gene. The gene was cloned behind a (His)6 leader for affinity purification. Virtually all of the overexpressed protein was found in inclusion bodies but could be purified to homogeneity on a Ni2+(-) containing resin. Over 200 mg of pure protein could be obtained from a liter of cell culture. Amino acid sequence comparison revealed the existence of a gene in Bacillus subtilis with a similar sequence, and psi sequence analysis established that B. subtilis has the equivalent of psi 516 in its small subunit rRNA. On the other hand, no common sequence motifs could be detected among this enzyme and the two tRNA psi synthases which have been cloned up to now.