Various specialized domains have been described in the cytosol and the nucleus; however, little is known about compartmentalization within the mitochondrial matrix. GRSF1 (G-rich sequence factor 1) is an RNA binding protein that was previously reported to localize in the cytosol. We found that an isoform of GRSF1 accumulates in discrete foci in the mitochondrial matrix. These foci are composed of nascent mitochondrial RNA and also contain RNase P, an enzyme that participates in mitochondrial RNA processing. GRSF1 was found to interact with RNase P and to be required for processing of both classical and tRNA-less RNA precursors. In its absence, cleavage of primary RNA transcripts is abnormal, leading to decreased expression of mitochondrially encoded proteins and mitochondrial dysfunction. Our findings suggest that the foci containing GRSF1 and RNase P correspond to sites where primary RNA transcripts converge to be processed. We have termed these large ribonucleoprotein structures "mitochondrial RNA granules."