A 148-nucleotide subfragment of hepatitis delta virus RNA was shown to undergo cleavage and ligation reversibly. The direction of the reaction is determined by the presence or absence of Mg2+ ions, with the presence of Mg2+ favoring the cleavage reaction. Ligation requires specific conformation of the RNA molecules involved and occurs only between two cleaved RNA fragments that are still held together by hydrogen bonds. The ligation reaction occurs rapidly on removal of Mg2+ by EDTA. This represents a new class of RNA enzymes.