EXCISION of introns from nuclear precursors to messenger RNAs (pre-mRNAs) by the spliceosome requires two distinct phosphodiester transfer (transesterification) reactions: exchange of a 3'-5' for a 2'-5' bond in the first step (lariat formation) and exchange of one 3'-5' phosphodiester for another in the second step (exon ligation)1-3. We report here determination of the stereochemical course of each step using splicing substrates that contained a chiral phosphorothioate. This has provided strong evidence that both steps occur as single `in-line' SN2 nucleophilic displacement reactions, analogous to the mechanism of group I self-splicing introns4,5. Additionally, because both steps are strongly inhibited by the RP phosphorothioate diastereomer, but not by SP, the spliceosome probably shifts between two active sites in catalysis of the two steps. Chemical and stereochemical similarities suggest that the catalytic site for the second step of spliceosomal processing is related to that of group I self-splicing introns.