SIRT7 is an NAD(+)-dependent protein deacetylase with important roles in ribosome biogenesis and cell proliferation. Previous studies have established that SIRT7 is associated with RNA polymerase I, interacts with pre-ribosomal RNA (rRNA) and promotes rRNA synthesis. Here we show that SIRT7 is also associated with small nucleolar RNP (snoRNPs) that are involved in pre-rRNA processing and rRNA maturation. Knockdown of SIRT7 impairs U3 snoRNA dependent early cleavage steps that are necessary for generation of 18S rRNA. Mechanistically, SIRT7 deacetylates U3-55k, a core component of the U3 snoRNP complex, and reversible acetylation of U3-55k modulates the association of U3-55k with U3 snoRNA. Deacetylation by SIRT7 enhances U3-55k binding to U3 snoRNA, which is a prerequisite for pre-rRNA processing. Under stress conditions, SIRT7 is released from nucleoli, leading to hyperacetylation of U3-55k and attenuation of pre-rRNA processing. The results reveal a multifaceted role of SIRT7 in ribosome biogenesis, regulating both transcription and processing of rRNA.