In bacteria, an intrinsic transcription termination signal appears in RNA as a hairpin followed by approximately eight uridines (U stretch) at the 3' terminus. This signal leads to rapid dissociation of the ternary elongation complex (TEC) into RNA, DNA, and an RNA polymerase. We demonstrate that the hairpin inactivates and then destabilizes TEC by weakening interactions in the RNA-DNA hybrid-binding site and the RNA-binding site that hold TEC together. Formation of the hairpin is restricted to the moment when TEC reaches the point of termination and depends upon melting of four to five hybrid base pairs that follow the hairpin's stem. The U stretch-induced pausing at the point of termination is crucial, providing additional time for hairpin formation. These results explain the mechanism of termination and aid in understanding of how cellular factors modulate this process.