Spliceosomal proteins direct RNA methylation to modulate gene expression and silence retrotransposons.

RNA modifications are fundamental to gene regulation and RNA processing, yet their diversity and transcript specificity remain incompletely defined. Here, using a genetic screen in S. pombe, we identify the RNA methyltransferase Tgs1 and Coilin-related proteins as regulators of transcripts harboring inefficiently spliced cryptic introns. These factors associate to form a protein assembly, termed TEaM, which is recruited to cryptic-intron-containing RNAs, including retrotransposon-derived transcripts, by spliceosomal components, and to gametogenic gene transcripts by a YTH-family RNA-binding protein. Upon recruitment, Tgs1 catalyzes trimethylguanosine (TMG) capping, facilitating engagement of the conserved factor Pir2/ARS2, which cooperates with the DROSHA homolog Pac1 and other factors to promote RNA processing and RNAi-mediated silencing. This pathway also targets centromeric repeat RNAs containing cryptic introns, enabling de novo production of siRNAs that specify heterochromatin nucleation. Together, these findings delineate a mechanism in which Tgs1-directed TMG capping, coupled with Pir2/ARS2, specifies RNAi substrates to broadly regulate gene expression and silence retrotransposons.