Non-coding Y RNAs and stem-bulge RNAs are homologous small RNAs in vertebrates and nematodes, respectively. They share a conserved function in the replication of chromosomal DNA in these two groups of organisms. However, functional homologues have not been found in insects, despite their common early evolutionary history. Here, we describe the identification and functional characterization of two sbRNAs in Drosophila melanogaster, termed Dm1 and Dm2. The genes coding for these two RNAs were identified by a computational search in the genome of D. melanogaster for conserved sequence motifs present in nematode sbRNAs. The predicted secondary structures of Dm1 and Dm2 partially resemble nematode sbRNAs and show stability in molecular dynamics simulations. Both RNAs are phylogenetically closer related to nematode sbRNAs than to vertebrate Y RNAs. Dm1, but not Dm2 sbRNA is abundantly expressed in D. melanogaster S2 cells and adult flies. Only Dm1, but not Dm2 sbRNA can functionally replace Y RNAs in a human cell-free DNA replication initiation system. Therefore, Dm1 is the first functional sbRNA described in insects, allowing future investigations into the physiological roles of sbRNAs in the genetically tractable model organism D. melanogaster.