Telomerase, a reverse transcriptase, counteracts the progressive loss of chromosome-terminal DNA sequences in most eukaryotes. Work from C. W. Greider and E. H. Blackburn first revealed telomerase activity in Tetrahymena extracts. Subsequent work demonstrated telomerase is a multisubunit ribonucleoprotein complex which uses part of an RNA subunit as a template to synthesize telomeric DNA. Most cancer cells show high telomerase activity, while telomerase insufficiency due to mutations in telomerase components leads to several degenerative syndromes including dyskeratosis congenita, aplastic anaemia, and idiopathic pulmonary fibrosis. Given the therapeutic value of modulating telomerase activity, it is important to study its assembly, regulation, and enzymatic action in human and model systems. We have identified the RNA subunit of telomerase (TER1) in fission yeast, and we showed that the mature 3' end of TER1 is generated by the spliceosome in a reaction ("slicing") akin to the first step of splicing. Through examining a putative Sm protein binding site that partially overlaps the 5' splicing site and thus is located at 3' end of mature TER1, we found that the canonical Sm complex and Lsm2-8 (Sm-like) complex sequentially bind to TER1 and play distinct roles on telomerase RNA biogenesis. Sm and Lsm proteins belong to an ancient family of RNA binding proteins represented in all three domains of life. They form multimeric complexes on specific sets of non-coding RNAs and play critical roles in their biogenesis, function and degradation. The Sm complex specifically binds to the TER1 precursor, promotes spliceosomal cleavage, and facilitates trimethyguanosine (TMG) cap formation at its 5' end. At later stages, the Lsm2-8 complex replaces the Sm complex and binds to the majority of TER1. The Lsm complex protects mature TER1 from exonucleolytic degradation and promotes catalytic subunit to bind to TER1. Our findings provide new insights into telomerase biogenesis by defining roles for Sm and Lsm complexes as well as the TMG cap. Also our results constitute the first identification of RNA whose biogenesis requires both the Sm and Lsm2-8 complexes.