The U5 snRNA loop 1 interacts with the 5' exon before the first step of pre-mRNA splicing and with the 5' and 3' exons following the first step. These U5-exon interactions are proposed to hold the exons in the correct orientation for the second step of splicing. Reconstitution of U5 snRNPs in vitro indicated that U5 loop 1-5' exon interactions are not necessary for the first catalytic step of splicing but are critical for the second step in yeast spliceosomes. We systematically made deletion and insertion mutations in loop 1 then monitored splicing activity and loop-exon interactions by cross-linking. Single nucleotide deletions or insertions in loop 1 permitted both steps of splicing. Larger insertions or deletions allowed the first step but progressively inhibited the second step. Analysis of selected loop 1 insertions and deletions by cross-linking revealed that inhibition of the second catalytic step resulted from misalignment of the 5' and 3' exons. These data indicate that the size of loop 1 is critical for proper alignment of the exons for the second catalytic step of splicing and that the 3' exon is positioned on loop 1 independently of the 5' exon.