In its natural context, the hairpin ribozyme is constructed around a four-way helical junction. This presents the two loops that interact to form the active site on adjacent arms, requiring rotation into an antiparallel structure to bring them into proximity. In the present study we have compared the folding of this form of the ribozyme and subspecies lacking either the loops or the helical junction using fluorescence resonance energy transfer. The complete ribozyme as a four-way junction folds into an antiparallel structure by the cooperative binding of magnesium ions, requiring 20–40 μM for half-maximal extent of folding ([Mg2+]1/2) and a Hill coefficient n = 2. The isolated junction (lacking the loops) also folds into a corresponding antiparallel structure, but does so noncooperatively (n = 1) at a higher magnesium ion concentration ([Mg2+]1/2 = 3 mM). Introduction of a G + 1A mutation into loop A of the ribozyme results in a species with very similar folding to the simple junction, and complete loss of ribozyme activity. Removal of the junction from the ribozyme, replacing it either with a strand break (serving as a hinge) or a GC5 bulge, results in greatly impaired folding, with [Mg2+]1/2 > 20 mM. The results indicate that the natural form of the ribozyme undergoes ion-induced folding by the cooperative formation of an antiparallel junction and loop–loop interaction to generate the active form of the ribozyme. The four-way junction thus provides a scaffold in the natural RNA that facilitates the folding of the ribozyme into the active form.