Simple sequence repeat telomeric DNA is maintained by a specialized reverse transcriptase, telomerase. The integral RNA subunit of telomerase contains a template region that determines the sequence added to chromosome ends. Aside from providing the template, little is known about the role of the telomerase RNA. In addition, no hypotheses have been suggested to account for the striking evolutionary divergence in size and sequence between telomerase RNAs of ciliates, yeasts, and mammals. We show that the two- to threefold increase in size of the mammalian telomerase RNAs relative to ciliate telomerase RNAs is due to the presence of an extra domain resembling a box H/ACA small nucleolar RNA (snoRNA). The human telomerase RNA (hTR) H/ACA domain is essential in vivo for hTR accumulation, hTR 3' end processing, and telomerase activity. By substituting the U64 box H/ACA snoRNA for the hTR H/ACA domain, we demonstrate that a heterologous snoRNA can function to promote chimeric RNA accumulation and 3' end processing but not telomerase activity. In addition, we show that maturation of full-length hTR and its assembly into active telomerase occur from an mRNA promoter-driven RNA polymerase II transcript but not from a U6 snRNA promoter-driven RNA polymerase III transcript. Finally, we show that a small percentage of hTR is associated with nucleoli. These results have implications for the biogenesis and structure of hTR and the human telomerase ribonucleoprotein complex. They also expand the structural and functional diversity of the box H/ACA snoRNA motif.