Elucidating the mechanism of transcription initiation by RNA polymerases (RNAP) is essential for understanding gene transcription and regulation. Although several models, such as DNA scrunching, RNAP translation, and RNAP rotation, have been proposed, the mechanism of initiation by T7 RNAP has remained unclear. Using ensemble and single-molecule Förster resonance energy transfer (FRET) studies, we provide evidence for concerted DNA scrunching and rotation during initiation by T7 RNAP. A constant spatial distance between the upstream and downstream edges of initiation complexes making 4-7 nt RNA supports the DNA scrunching model, but not the RNAP translation or the pure rotation model. DNA scrunching is accompanied by moderate hinging motion (18 degrees +/- 4 degrees ) of the promoter toward the downstream DNA. The observed stepwise conformational changes provide a basis to understand abortive RNA synthesis during early stages of initiation and promoter escape during the later stages that allows transition to processive elongation.