The exosome complex is involved in multiple RNA processing and degradation pathways. How exosome is recruited to particular RNA substrates and then chooses between RNA processing and degradation modes remains unclear. We find that the RNA binding protein Nrd1, complexed with its partners Nab3, Sen1, and cap binding complex, physically interacts with the nuclear form of exosome. Nrd1 stimulates the RNA degradation activity of the exosome in vitro. However, Nrd1 can also block 3' to 5' degradation by the exosome at some Nrd1 binding sites. Nrd1 mutations share some phenotypes with exosome mutants, including increased readthrough transcription from several mRNA and sn/snoRNA genes. Therefore, Nrd1 may recruit exosome to RNA and influence the choice between processing and degradation. Since Nrd1 is known to bind RNA polymerase II and be important for sn/snoRNA 3' end processing, Nrd1 may link transcription and RNA 3' end formation with surveillance by the exosome.