The structure of a ribonuclease III processing signal from bacteriophage T7 was examined by NMR spectroscopy, optical melting, and chemical and enzymatic modification. A 41 nucleotide variant of the T7 R1.1 processing signal has two Watson-Crick base-paired helices separated by an internal loop, consistent with its predicted secondary structure. The internal loop is neither rigidly structured nor completely exposed to solvent, and seems to be helical. The secondary structure of R1.1 RNA is largely insensitive to the monovalent cation concentration, which suggests that the monovalent cation sensitivity of secondary site cleavage by RNase III is not due to a low salt-induced RNA conformational change. However, spectroscopic data show that Mg2+ affects the conformation of the internal loop, suggesting a divalent cation binding site(s) within this region. The Mg(2+)-dependence of RNase III processing of some substrates may reflect not only a requirement for a divalent cation as a catalytic cofactor, but also a requirement for a local RNA conformation which is divalent cation-stabilized.