Covalent joining of leader RNA exons to pre-mRNAs by trans-splicing has been observed in protists and invertebrates, and can occur in cultured mammalian cells. In the nematode Caenorhabditis elegans, approximately 60% of mRNA species are trans-spliced to the 22-nucleotide SL1 leader, and another approximately 10% of mRNAs receive the 22-nucleotide SL2 leader. We have isolated deletions that remove the rrs-1 cluster, a gene complex that contains approximately 110 tandem copies of a repeat encoding both SL1 RNA and 5S rRNA. An SL1-encoding gene alone rescues the embryonic lethality caused by these deletions. Mutations within the Sm-binding site of SL1 RNA, which is required for trans-splicing, eliminate rescue, suggesting that the ability of the SL1 leader to be trans-spliced is required for its essential activity. We observe pleiotropic defects in embryos lacking SL1 RNA, suggesting that multiple mRNAs may be affected by the absence of an SL1 leader. We found, however, that SL1-receiving messages are expressed without an SL1 leader. Surprisingly, when overexpressed, SL2 RNA, which performs a distinct function from that of SL1 RNA in wild-type animals, can rescue the lethality of embryos lacking SL1 RNA. Moreover, in these mutant embryos, we detect SL2 instead of SL1 leaders on normally SL1-trans-spliced messages; this result suggests that the mechanism that discriminates between SL1 and SL2-trans-splicing may involve competition between SL1 and SL2-specific trans-splicing. Our findings demonstrate that SL1 RNA is essential for embryogenesis in C. elegans and that SL2 RNA can substitute for SL1 RNA in vivo.