We have used genetics as a tool to study the importance of an internal loop (P7) of Escherichia coli RNase P RNA (M1 RNA) in cleavage site selection and the binding of a divalent metal ion(s). The preferred cleavage site on a model tRNA precursor substrate shifted as a result of base-substitutions and deletions within this loop, in particular when changes were introduced at positions directly involved in base-pairing with the 3'-terminal RCCA motif of the substrate. Additionally, these changes in M1 RNA resulted in alterations in the binding of a divalent metal ion(s) in the vicinity of this internal loop as revealed by lead(II)-induced cleavage. From these data we conclude that the structural integrity of the P7 loop is important for both cleavage site selection and divalent metal ion binding. Cross-linking experiments using precursors carrying a 4-thioU immediately 5' of two independent cleavage sites suggest that close contact points between M1 RNA and nucleotides at these cleavage sites depend on the interaction between M1 RNA and the 3'-terminal RCCA motif of the substrate. Our findings further support the view that there are at least two different ways for the tRNA domain of a tRNA precursor to interact with M1 RNA. These results support a model in which base-pairing between M1 RNA and its substrate results in a re-coordination of a divalent metal ion(s) such that cleavage at the correct position is accomplished.