Processing of primary microRNA (pri-miRNA) stem–loops by the Drosha–DGCR8 complex is the initial step in miRNA maturation and crucial for miRNA function. Nonetheless, the underlying mechanism that determines the Drosha cleavage site of pri-miRNAs has remained unclear. Two prevalent but seemingly conflicting models propose that Drosha–DGCR8 anchors to and directs cleavage a fixed distance from either the basal single-stranded (ssRNA) or the terminal loop. However, recent studies suggest that the basal ssRNA and/or the terminal loop may influence the Drosha cleavage site dependent upon the sequence/structure of individual pri-miRNAs. Here, using a panel of closely related pri-miRNA variants, we further examine the role of pri-miRNA structures on Drosha cleavage site selection in cells. Our data reveal that both the basal ssRNA and terminal loop influence the Drosha cleavage site within three pri-miRNAs, the Simian Virus 40 (SV40) pri-miRNA, pri-miR-30a, and pri-miR-16. In addition to the flanking ssRNA regions, we show that an internal loop within the SV40 pri-miRNA stem strongly influences Drosha cleavage position and efficiency. We further demonstrate that the positions of the internal loop, basal ssRNA, and the terminal loop of the SV40 pri-miRNA cooperatively coordinate Drosha cleavage position and efficiency. Based on these observations, we propose that the pri-miRNA stem, defined by internal and flanking structural elements, guides the binding position of Drosha–DGCR8, which consequently determines the cleavage site. This study provides mechanistic insight into pri-miRNA processing in cells that has numerous biological implications and will assist in refining Drosha-dependent shRNA design.