The conserved endoribonuclease RNase E dominates the dynamic landscape of RNA metabolism and underpins control mediated by small regulatory RNAs in diverse bacterial species. We explored the enzyme's hydrolytic mechanism, allosteric activation, and interplay with partner proteins in the multicomponent RNA degradosome assembly of Escherichia coli. RNase E cleaves single-stranded RNA with preference to attack the phosphate located at the 5' nucleotide preceding uracil, and we corroborate key interactions that select that base. Unexpectedly, RNase E activity is impeded strongly when the recognized uracil is isomerized to 5-ribosyluracil (pseudouridine), from which we infer the detailed geometry of the hydrolytic attack process. Kinetics analyses support models for recognition of secondary structure in substrates by RNase E and for allosteric autoregulation. The catalytic power of the enzyme is boosted when it is assembled into the multienzyme RNA degradosome, most likely as a consequence of substrate capture and presentation. Our results rationalize the origins of substrate preferences of RNase E and illuminate its catalytic mechanism, supporting the roles of allosteric domain closure and cooperation with other components of the RNA degradosome complex.