The 5' untranslated region of Rous sarcoma virus (RSV) RNA is a highly ordered structure involved in multiple processes in the viral replication cycle. One of these structures, referred to as the U5-IR stem, is located immediately upstream of the 5' end of the primer binding site. Disruption of its base pairing results in a decrease in initiation of reverse transcription (D. Cobrinik, A. Aiyar, Z. Ge, M. Katzman, H. Huang, and J. Leis, J. Virol. 65:3864-3872, 1991). In the present study, the length of the U5-IR stem structure has been extended by insertions of different sequences which decrease the efficiency of reverse transcription, in vivo and in vitro. Reverse transcription is rescued partially by placing single-stranded bulges into the middle of the extended duplexes. Nucleotide substitutions or insertions into the loop region of the U5-IR stem also decrease the efficiency of reverse transcription, suggesting that these sequences may specifically interact with reverse transcriptase. Surprisingly, all of the extended stem mutations cause significant RNA packaging defects. In contrast, nucleotide insertions or base substitutions in the U5-IR loop do not affect RNA packaging. These data indicate that the reverse transcription initiation complex and RNA packaging apparatus are influenced by the same region of RSV RNA and that each process is differentially sensitive to changes in sequence and/or secondary structure.