The relationship between hairpin ribozyme structure, and cleavage and ligation kinetics, and equilibria has been characterized extensively under a variety of reaction conditions in vitro. We developed a quantitative assay of hairpin ribozyme cleavage activity in yeast to learn how structure-function relationships defined for RNA enzymes in vitro relate to RNA-mediated reactions in cells. Here, we report the effects of variation in the stability of an essential secondary structure element, H1, on intracellular cleavage kinetics. H1 is the base-paired helix formed between ribozyme and 3' cleavage product RNAs. H1 sequences with fewer than three base-pairs fail to support full activity in vitro or in vivo, arguing against any significant difference in the stability of short RNA helices under in vitro and intracellular conditions. Under standard conditions in vitro that include 10 mM MgCl2, the internal equilibrium between cleavage and ligation of ribozyme-bound products favors ligation. Consequently, ribozymes with stable H1 sequences display sharply reduced self-cleavage rates, because cleavage is reversed by rapid re-ligation of bound products. In contrast, ribozymes with as many as 26 base-pairs in H1 continue to self-cleave at maximum rates in vivo. The failure of large products tc, inhibit cleavage could be explained if intracellular conditions promote rapid product dissociation or shift the internal equilibrium to favor cleavage. Model experiments in vitro suggest that the internal equilibrium between cleavage and ligation of hound products is likely to favor cleavage under intracellular ionic conditions. (C) 2000 Academic Press.