Despite a growing literature on the folding of RNA, our understanding of tertiary folding in large RNAs derives from studies on a small set of molecular examples, with primary focus on group I introns and RNase P RNA. To broaden the scope of RNA folding models and to better understand group II intron function, we have examined the tertiary folding of a ribozyme (D135) that is derived from the self-splicing ai5gamma intron from yeast mitochondria. The D135 ribozyme folds homogeneously and cooperatively into a compact, well-defined tertiary structure that includes all regions critical for active-site organization and substrate recognition. When D135 was treated with increasing concentrations of Mg(2+) and then subjected to hydroxyl radical footprinting, similar Mg(2+) dependencies were seen for internalization of all regions of the molecule, suggesting a highly cooperative folding behavior. In this work, we show that global folding and compaction of the molecule have the same magnesium dependence as the local folding previously observed. Furthermore, urea denaturation studies indicate highly cooperative unfolding of the ribozyme that is governed by thermodynamic parameters similar to those for forward folding. In fact, D135 folds homogeneously and cooperatively from the unfolded state to its native, active structure, thereby demonstrating functional reversibility in RNA folding. Taken together, the data are consistent with two-state folding of the D135 ribozyme, which is surprising given the size and multi-domain structure of the RNA. The findings establish that the accumulation of stable intermediates prior to formation of the native state is not a universal feature of RNA folding and that there is an alternative paradigm in which the folding landscape is relatively smooth, lacking rugged features that obstruct folding to the native state.