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That's a good question; it would seem that the nucleolus should be in the cytoplasm since that is where protein synthesis takes place.

I don't know if there is a definite answer to this, but here is my explanation: the nucleolus' main function is to create ribosomes (rRNA). The first step of ribosome creation is the transcription of rDNA by an enzyme called RNA polymerase I. I'm assuming that this enzyme is primarily located in the nucleus, which makes the nucleus a natural location for ribosome formation, and therefore a great place for the nucleolus.

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