Mitochondrial DNA (mtDNA) replication uses a simple core machinery similar to those of bacterial viruses and plasmids, but its components are challenging to unravel. Here, we found that, as in mammals, the single Drosophila gene for RNase H1 (rnh1) has alternative translational start sites, resulting in two polypeptides, targeted to either mitochondria or the nucleus. RNAi-mediated rnh1 knockdown did not influence growth or viability of S2 cells, but compromised mtDNA integrity and copy number. rnh1 knockdown in intact flies also produced a phenotype of impaired mitochondrial function, characterized by respiratory chain deficiency, locomotor dysfunction, and decreased lifespan. Its overexpression in S2 cells resulted in cell lethality after 5-9 days, attributable to the nuclearly localized isoform. rnh1 knockdown and overexpression produced opposite effects on mtDNA replication intermediates. The most pronounced effects were seen in genome regions beyond the major replication pauses where the replication fork needs to progress through a gene cluster that is transcribed in the opposite direction. RNase H1 deficiency led to an accumulation of replication intermediates in these zones, abundant mtDNA molecules joined by four-way junctions, and species consistent with fork regression from the origin. These findings indicate replication stalling due to the presence of unprocessed RNA/DNA heteroduplexes, potentially leading to the degradation of collapsed forks or to replication restart by a mechanism involving strand invasion. Both mitochondrial RNA and DNA syntheses were affected by rnh1 knockdown, suggesting that RNase H1 also plays a role in integrating or coregulating these processes in Drosophila mitochondria.