Ty1 retrotransposon RNA has the potential to fold into a variety of distinct structures, mutation of which affects retrotransposition frequencies. We show here that one potential functional structure is located at the 5' end of the genome and can assume a pseudoknot conformation. Chemoenzymatic probing of wild-type and mutant mini-Ty1 RNAs supports the existence of such a structure, while molecular genetic analyses show that mutations disrupting pseudoknot formation interfere with retrotransposition, indicating that it provides a critical biological function. These defects are enhanced at higher temperatures. When these mutants are combined with compensatory changes, retrotransposition is restored, consistent with pseudoknot architecture. Analyses of mutants suggest a defect in Ty1 reverse transcription. Collectively, our data allow modeling of a three-dimensional structure for this novel critical cis-acting signal of the Ty1 genome.