In eukaryotes, the highly conserved U3 small nucleolar RNA (snoRNA) base-pairs to multiple sites in the pre-ribosomal RNA (pre-rRNA) to promote early cleavage and folding events. Binding of the U3 box A region to the pre-rRNA is mutually exclusive with folding of the central pseudoknot (CPK), a universally conserved rRNA structure of the small ribosomal subunit essential for protein synthesis. Here, we report that the DEAH-box helicase Dhr1 (Ecm16) is responsible for displacing U3. An active site mutant of Dhr1 blocked release of U3 from the pre-ribosome, thereby trapping a pre-40S particle. This particle had not yet achieved its mature structure because it contained U3, pre-rRNA, and a number of early-acting ribosome synthesis factors but noticeably lacked ribosomal proteins (r-proteins) that surround the CPK. Dhr1 was cross-linked in vivo to the pre-rRNA and to U3 sequences flanking regions that base-pair to the pre-rRNA including those that form the CPK. Point mutations in the box A region of U3 suppressed a cold-sensitive mutation of Dhr1, strongly indicating that U3 is an in vivo substrate of Dhr1. To support the conclusions derived from in vivo analysis we showed that Dhr1 unwinds U3-18S duplexes in vitro by using a mechanism reminiscent of DEAD box proteins.