Specific binding of HIV-1 viral protein NCp7 to a unique 35-base RNA stem-loop SL1 is critical for formation and packaging of the genomic RNA dimer found within HIV-1 virions. NCp7 binding stimulates refolding of SL1 from a metastable kissing dimer (KD) into thermodynamically stable linear dimer (LD). Using UV melting, gel electrophoresis and heteronuclear NMR, we investigated effects of various site-specific mutations within the full-length SL1 on temperature- or NCp7-induced refolding in vitro. Refolding involved intramolecular melting of SL1 stems but not dissociation of the intermolecular KD interface. Refolding required only two NCp7 molecules per KD but was limited by the amount of NCp7 present, implying that the protein does not catalytically promote refolding. Efficient refolding depended strictly on the presence and, to a lesser degree, on sequence of a highly conserved G-rich internal loop that normally limits thermal stability of the SL1 stem. Adding two base pairs to the lower stem created a hyperstable SL1 mutant that failed to refold, even when bound by NCp7 at high stoichiometries. NMR analysis of these kinetically trapped mutant RNA–protein complexes indicated that NCp7 initiates refolding by dissociating base pairs in the upper stem of SL1. This study illuminates structural transitions critical for HIV-1 assembly and replication.