The branched RNA (msdRNA) of M. xanthus consists of 77 bases. The 20th rG residue is linked to the 5' end of msDNA, consisting of 162 bases, by a 2', 5' phosphodiester linkage. The msdRNA coding region is located on the chromosome in the opposite orientation to the msDNA coding region, with the 3' ends overlapping by eight bases. S1 nuclease mapping experiments indicate that the primary product of msdRNA is much longer at both the 5' and 3' ends (approximately 375 bases). Because of homologous sequences upstream of the msdRNA and msDNA coding regions, the precursor RNA molecule is considered to form an extremely stable stem-and-loop structure (delta G = -210 kcal). We propose a novel mechanism of DNA synthesis in which the stem-and-loop structure serves as a primer as well as a template to form the branched RNA-linked msDNA.