In bacteria, small non-coding RNAs (sRNAs) bind to target mRNAs and regulate their translation and/or stability. In the polycistronic galETKM operon of Escherichia coli, binding of the Spot 42 sRNA to the operon transcript leads to the generation of galET mRNA. The mechanism of this regulation has remained unclear. We show that sRNA-mRNA base pairing at the beginning of the galK gene leads to both transcription termination and transcript cleavage within galK, and generates galET mRNAs with two different 3'-OH ends. Transcription termination requires Rho, and transcript cleavage requires the endonuclease RNase E. The sRNA-mRNA base-paired segments required for generating the two galET species are different, indicating different sequence requirements for the two events. The use of two targets in an mRNA, each of which causes a different outcome, appears to be a novel mode of action for a sRNA. Considering the prevalence of potential sRNA targets at cistron junctions, the generation of new mRNA species by the mechanisms reported here might be a widespread mode of bacterial gene regulation.