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TnpB nucleases represent the evolutionary precursors to CRISPR-Cas12 and are widespread in all domains of life. IS605-family TnpB homologs function as programmable RNA-guided homing endonucleases in bacteria, driving transposon maintenance through DNA double-strand break–stimulated homologous recombination. In this work, we uncovered molecular mechanisms of the transposition life cycle of IS607-family elements that, notably, also encode group I introns. We identified specific features for a candidate “IStron” fromClostridium botulinumthat allow the element to carefully control the relative levels of spliced products versus functional guide RNAs. Our results suggest that IStron transcripts evolved an ability to balance competing and mutually exclusive activities that promote selfish transposon spread while limiting adverse fitness costs on the host. Collectively, this work highlights molecular innovation in the multifunctional utility of transposon-encoded noncoding RNAs.