Small catalytic RNAs like the hairpin ribozyme are proving to be useful intracellular tools; however, most attempts to demonstrate trans-cleavage of RNA by ribozymes in cells have been frustrated by rapid cellular degradation of the cleavage products. Here, we describe a fluorescence resonance energy transfer (FRET) assay that directly monitors cleavage of target RNA in tissue-culture cells. An oligoribonucleotide substrate was modified to inhibit cellular ribonuclease degradation without interfering with ribozyme cleavage, and donor (fluorescein) and acceptor (tetramethylrhodamine) fluorophores were introduced at positions flanking the cleavage site. In simple buffers, the intact substrate produces a strong FRET signal that is lost upon cleavage, resulting in a red-to-green shift in dominant fluorescence emission. Hairpin ribozyme and fluorescent substrate were microinjected into murine fibroblasts under conditions in which substrate cleavage can occur only inside the cell. A strong FRET signal was observed by fluorescence microscopy when substrate was injected, but rapid decay of the FRET signal occurred when an active, cognate ribozyme was introduced with the substrate. No acceleration in cleavage rates was observed in control experiments utilizing a noncleavable substrate, inactive ribozyme, or an active ribozyme with altered substrate specificity. Subsequently, the fluorescent substrates were injected into clonal cell lines that expressed cognate or noncognate ribozymes. A decrease in FRET signal was observed only when substrate was microinjected into cells expressing its cognate ribozyme. These results demonstrate trans-cleavage of RNA within mammalian cells, and provide an experimental basis for quantitative analysis of ribozyme activity and specificity within the cell.