Transcription-proximal stages of U1 small nuclear RNA biosynthesis were studied by 32P labeling of nascent chains in isolated HeLa cell nuclei. Labeled RNA was hybridized to nitrocellulose-immobilized, single-stranded M13 DNA clones corresponding to regions within or flanking a human U1 RNA gene. Transcription of U1 RNA was inhibited by greater than 95% by alpha-amanitin at 1 microgram/ml, consistent with previous evidence that it is synthesized by RNA polymerase II. No hybridization to DNA immediately adjacent to the 5' end of mature U1 RNA (-6 to -105 nucleotides) was detected, indicating that, like all studied polymerase II initiation, transcription of U1 RNA starts at or very near the cap site. However, in contrast to previously described transcription units for mRNA, in which equimolar transcription occurs for hundreds or thousands of nucleotides beyond the mature 3' end of the mRNA, labeled U1 RNA hybridization dropped off sharply within a very short region (approximately 60 nucleotides) immediately downstream from the 3' end of mature U1 RNA. Also in contrast to pre-mRNA, which is assembled into ribonucleoprotein (RNP) particles while still nascent RNA chains, the U1 RNA transcribed in isolated nuclei did not form RNP complexes by the criterion of reaction with a monoclonal antibody for the small nuclear RNP Sm proteins. This suggests that, unlike pre-mRNA-RNP particle formation, U1 small nuclear RNP assembly does not occur until after the completion of transcription. These results show that, despite their common synthesis by RNA polymerase II, mRNA and U1 small nuclear RNA differ markedly both in their extents of 3' processing and their temporal patterns of RNP assembly.