Direct interactions between RNA-binding proteins and snRNP particles modulate eukaryotic pre-mRNA processing patterns to control gene expression. Here, we report that the conserved U1 snRNP-interacting RNA-binding protein PSI is essential for Drosophila viability. A null PSI mutation is recessive lethal at the first-instar larval stage, and lethality is fully rescued by transgenes expressing the PSI protein. A mutant transgene that lacks the PSI-U1 snRNP-interaction domain restores viability but shows courtship behavior abnormalities and meiosis defects during spermatogenesis, resulting in a complete male sterility phenotype. Using cDNA microarrays, we have identified specific target mRNAs with altered expression profiles in these mutant males. A subset of these transcripts is also found associated with PSI in endogenous immunopurified ribonucleoprotein complexes. One specific target, the hrp40/squid transcript, shows an altered pre-mRNA splicing pattern in PSI mutant testes. We conclude that a functional association between the PSI protein and the spliceosomal U1 snRNP particle is required for normal Drosophila development and for the processing of specific PSI-interacting cellular transcripts. These results also validate the use of cDNA microarrays to characterize in vivo RNA-processing defects and alternative pre-mRNA splicing patterns.