To equalize X-linked gene dosage between the sexes in mammalian females, Xist RNA inactivates one of the two X-chromosomes. Here, we report the crucial function of Xist exon 7 in X-inactivation. Xist exon 7 is the second-largest exon with a well-conserved repeat E in eutherian mammals, but its role is often overlooked in X-inactivation. Although female ES cells with a targeted truncation of the Xist exon 7 showed no significant differences in their Xist expression levels and RNA stability from control cells expressing wild-type Xist, compromised localization of Xist RNA and incomplete silencing of X-linked genes on the inactive X-chromosome (Xi) were observed in the exon 7-truncated mutant cells. Furthermore, the interaction between the mutant Xist RNA and hnRNP U required for localization of Xist RNA to the Xi was impaired in the Xist exon 7 truncation mutant cells. Our results suggest that exon 7 of Xist RNA plays an important role for stable Xist RNA localization and silencing of the X-linked genes on the Xi, possibly acting through an interaction with hnRNP U.