The thermal denaturation ultraviolet absorption spectra of N6,N6-dimethyladenylyl(3' leads to 5')-N6,N6-dimethyladenosine (m2(6)Apm2(6)A), which is a common sequence in 16--18-S ribosomal RNA, in aqueous buffer at pH 7 have been measured over the temperature range 3-90 degrees C. These data have been used to determine the thermodynamic quantitites associated with the intramolecular stacking equilibria. At 25 degrees C in neutral aqueous solution m2(6)Apmw(6)A exists mainly (about 81%) as a stacked form, so that the stacking interactions are stronger than those in the parent unmethylated adenylyl-(3'-5')adenosine (ApA), where about 52% is stacked. From the parameters of delta H and delta S, it is concluded that 'hidden' hydrophobic inteactions are of prime importance in the enhanced stability of m2(6)Apm2(6)A. Transphosphorylation reaction of ApA and m2(6)Apm2(6)A to form the corresponding cyclic 2',3'-phosphates has been studied. First-order rate constants at 25 degrees C for the reactions, which are base-catalyzed, have been obtained. Insertion of two methyl groups at N-6 of ApA reduces the rate of transphosphorylation. Effects of stacking on rates are discussed in the light of reaction mechanisms.