The U1 small nuclear ribonucleoprotein (snRNP)-specific U1C protein participates in 5′ splice site recognition and regulation of pre-mRNA splicing. Based on an RNA-Seq analysis in HeLa cells after U1C knockdown, we found a conserved, intra-U1 snRNP cross-regulation that links U1C and U1-70K expression through alternative splicing and U1 snRNP assembly. To investigate the underlying regulatory mechanism, we combined mutational minigene analysis, in vivo splice-site blocking by antisense morpholinos, and in vitro binding experiments. Alternative splicing of U1-70K pre-mRNA creates the normal (exons 7-8) and a non-productive mRNA isoform, whose balance is determined by U1C protein levels. The non-productive isoform is generated through a U1C-dependent alternative 3′ splice site, which requires an adjacent cluster of regulatory 5′ splice sites and binding of intact U1 snRNPs. As a result of nonsense-mediated decay (NMD) of the non-productive isoform, U1-70K mRNA and protein levels are down-regulated, and U1C incorporation into the U1 snRNP is impaired. U1-70K/U1C-deficient particles are assembled, shifting the alternative splicing balance back towards productive U1-70K splicing, and restoring assembly of intact U1 snRNPs. Taken together, we established a novel feedback regulation that controls U1-70K/U1C homeostasis and ensures correct U1 snRNP assembly and function.