Members of the RNase III family are found in all species examined with the exception of archaebacteria, where the functions of RNase III are carried out by the bulge-helix-bulge nuclease (BHB) [1]. In bacteria, RNase III contributes to the processing of many noncoding RNAs and directly cleaves several cellular and phage mRNAs [2, 3]. In eukaryotes, orthologs of RNase III participate in the biogenesis of many miRNAs [19, 20] and siRNAs [21], and this biogenesis initiates the degradation or translational repression of several mRNAs [22–25]. However, the capacity of eukaryotic RNase IIIs to regulate gene expression by directly cleaving within the coding sequence of mRNAs remains speculative. Here we show that Rnt1p, a member of the RNase III family, selectively inhibits gene expression in baker's yeast by directly cleaving a stem-loop structure within the mRNA coding sequence. Analysis of mRNA expression upon the deletion of Rnt1p revealed an upregulation of the glucose-dependent repressor Mig2p. Mig2p mRNA became more stable upon the deletion of Rnt1p and resisted glucose-dependent degradation. In vitro, Rnt1p cleaved Mig2p mRNA and a silent mutation that disrupts Rnt1p signals blocked Mig2p mRNA degradation. These observations reveal a new RNase III-dependent mechanism of eukaryotic mRNA degradation.