The Leishmania RNA virus 1-4 capsid protein possesses an endoribonuclease activity responsible for single-site-specific cleavage within the 450-nucleotide 5' untranslated region of its own viral RNA transcript. To characterize the minimal essential RNA determinants required for site-specific cleavage, mutated RNA transcripts were examined for susceptibility to cleavage by the virus capsid protein in an in vitro assay. Deletion analyses revealed that all determinants necessary for accurate cleavage are encoded in viral nucleotides 249 to 342. Nuclease mapping and site-specific mutagenesis of the minimal RNA sequence defined a stem-loop structure that is located 40 nucleotides upstream from the cleavage site (nucleotide 320) and that is essential for accurate RNA cleavage. Abrogation of cleavage by disruption of base pairing within the stem-loop was reversed through the introduction of complementary nucleotide substitutions that reestablished the structure. We also provide evidence that divalent cations, essential components of the cleavage reaction, stabilized the stem-loop structure in solution. That capsid-specific antiserum eliminated specific RNA cleavage provides further evidence that the virus capsid gene encodes the essential endoribonuclease activity.