Assembly of H/ACA RNPs in yeast is aided by at least two accessory factors, Naf1p and Shq1p. Although the function of Naf1p and its human ortholog NAF1 has been delineated in detail, that of Shq1p and its putative human ortholog SHQ1 remains obscure. We demonstrate that SHQ1 indeed functions in the biogenesis of human H/ACA RNPs and we dissect its mechanism of action. Like NAF1, SHQ1 binds the major H/ACA core protein and pseudouridine synthase NAP57 (aka dyskerin) but precedes the assembly role of NAF1 at nascent H/ACA RNAs because the interaction of SHQ1 with NAP57 in vivo and in vitro precludes that of NAF1 and of the other H/ACA core proteins that are present at the sites of H/ACA RNA transcription. The N-terminal heat shock protein 20-like CS domain of SHQ1 is dispensable for NAP57 binding. Consistent with its role as an assembly factor, SHQ1 localizes to the nucleoplasm and is excluded from nucleoli and Cajal bodies, the sites of mature H/ACA RNPs. In an in vitro assembly system of functional H/ACA RNPs that is dependent on NAF1, excess recombinant SHQ1 interferes with assembly. Importantly, knockdown of cellular SHQ1 prevents accumulation of a newly synthesized H/ACA reporter RNA and generally reduces the levels of endogenous H/ACA RNAs including telomerase RNA. In summary, the sequential action of SHQ1 and NAF1 is required for functional assembly of H/ACA RNPs in vivo and in vitro. This step-wise process could serve as an efficient means of quality control during H/ACA RNP assembly.