In prokaryotes, CRISPR-Cas systems provide adaptive immune responses against foreign genetic elements through RNA-guided nuclease activity. Recently, additional genes with non-nuclease functions have been found in genetic association with CRISPR systems, suggesting that there may be other RNA-guided non-nucleolytic enzymes. One such gene from Desulfonema ishimotonii encodes the TPR-CHAT protease Csx29, which is associated with the CRISPR effector Cas7-11. Here, we demonstrate that this CRISPR-associated protease (CASP) exhibits programmable RNA-activated endopeptidase activity against a sigma factor inhibitor to regulate a transcriptional response. Cryo–electron microscopy of an active and substrate-bound CASP complex reveals an allosteric activation mechanism that reorganizes Csx29 catalytic residues upon target RNA binding. This work reveals an RNA-guided function in nature that can be leveraged for RNA-sensing applications in vitro and in human cells.