We have examined the function of inverted repeat sequences found at the 3' ends of plastid DNA transcription units in higher plants, using a homologous in vitro transcription extract. The inverted repeat sequences are ineffective as transcription terminators, but serve as efficient RNA processing elements. Synthetic RNAs are processed in a 3'-5' direction by a nuclease activity present in the transcription extract, generating nearly homogeneous 3' ends distal to the inverted repeat sequence. S1 nuclease protection experiments demonstrate that the 3' ends generated in vitro coincide with those found for plastid mRNAs in vivo. RNA molecules possessing inverted repeats near their 3' ends are substantially more stable than control RNAs in the chloroplast extract, and kinetic measurements indicate that each RNA has a unique decay rate. Coupled with previously published information suggesting that the differential accumulation of plastid RNAs during development is effectively controlled by post-transcriptional mechanisms, these results raise the possibility that RNA processing and stability, specifically involving 3' end inverted repeats, are important regulatory features of plastid gene expression.