Counterions are required for RNA folding, and divalent metal ions such as Mg(2+) are often critical. To dissect the role of counterions, we have compared global and local folding of wild-type and mutant variants of P4-P6 RNA derived from the Tetrahymena group I ribozyme in monovalent and in divalent metal ions. A remarkably simple picture of the folding thermodynamics emerges. The equilibrium folding pathway in monovalent ions displays two phases. In the first phase, RNA molecules that are initially in an extended conformation enforced by charge-charge repulsion are relaxed by electrostatic screening to a state with increased flexibility but without formation of long-range tertiary contacts. At higher concentrations of monovalent ions, a state that is nearly identical to the native folded state in the presence of Mg(2+) is formed, with tertiary contacts that involve base and backbone interactions but without the subset of interactions that involve specific divalent metal ion-binding sites. The folding model derived from these and previous results provides a robust framework for understanding the equilibrium and kinetic folding of RNA.