The intervening sequence of the ribosomal RNA precursor of Tetrahymena is a catalytic RNA molecule, or ribozyme. Acting as a sequence-specific endoribonuclease, it cleaves single-stranded RNA substrates with concomitant addition of guanosine. The chemistry of the reaction has now been studied by introduction of a single phosphorothioate in the substrate RNA at the cleavage site. Kinetic studies show no significant effect of this substitution on kcat (rate constant) or Km (Michaelis constant), providing evidence that some step other than the chemical step is rate-limiting. Product analysis reveals that the reaction proceeds with inversion of configuration at phosphorus, consistent with an in-line, SN2 (P) mechanism. Thus, the ribozyme reaction is in the same mechanistic category as the individual displacement reactions catalyzed by protein nucleotidyltransferases, phosphotransferases, and nucleases.