Hantaviruses are tripartite negative-sense RNA viruses and members of the Bunyaviridae family. The nucleocapsid (N) protein is the principal structural component of the viral capsid. N forms a stable trimer that specifically recognizes the panhandle structure formed by the viral RNA termini. We used trimeric glutathione S-transferase (GST)-N protein and small RNA panhandles to examine the requirements for specific recognition by Sin Nombre hantavirus N. Trimeric GST-N recognizes the panhandles of the three viral RNAs (S, M, and L) with high affinity, whereas the corresponding plus-strand panhandles of the complementary RNA are recognized with lower affinity. Based on analysis of nucleotide substitutions that alter either the higher-order structure of the panhandle or the primary sequence of the panhandle, both secondary structure and primary sequence are necessary for stable interaction with N. A panhandle 23 nucleotides long is necessary and sufficient for high-affinity binding by N, and stoichiometry calculations indicate that a single N trimer interacts with a single panhandle. Surprisingly, displacement of the panhandle structure away from the terminus does not eliminate recognition by N. The binding of N to the panhandle is an entropy-driven process resulting in initial stable N-RNA interaction followed by a conformational change in N. Taken together, these data provide insight into the molecular events that take place during interaction of N with the panhandle and suggest that specific high-affinity interaction between an RNA binding domain of trimeric N and the panhandle is required for encapsidation of the three viral RNAs.