Telomerase ribonucleoprotein (RNP) employs an RNA subunit to template the addition of telomeric repeats onto chromosome ends. Previous studies have suggested that a region of the RNA downstream of the template may be important for telomerase activity and that the region could fold into a pseudoknot. Whether the pseudoknot motif is formed in the active telomerase RNP and what its functional role is have not yet been conclusively established. Using single-molecule FRET, we show that the isolated pseudoknot sequence stably folds into a pseudoknot. However, in the context of the full-length telomerase RNA, interference by other parts of the RNA prevents the formation of the pseudoknot. The protein subunits of the telomerase holoenzyme counteract RNA-induced misfolding and allow a significant fraction of the RNPs to form the pseudoknot structure. Only those RNP complexes containing a properly folded pseudoknot are catalytically active. These results not only demonstrate the functional importance of the pseudoknot but also reveal the critical role played by telomerase proteins in pseudoknot folding.T elomeres shorten with each round of DNA replication. Once telomeres reach a critical length, they become vulnerable to DNA damage response, which triggers cellular senescence and chromosome fusion (1). Telomerase protects telomeres from this replication-induced DNA erosion by addition of short G-rich repeats to the DNA ends (2). The telomerase enzyme is an attractive drug target in both cancer and regenerative medicine, because most highly proliferative cells, including stem and cancer cells, rely on its activity to maintain genomic integrity (3). Furthermore, multiple human diseases are known to be caused by mutations in telomerase subunits (4-6), underscoring the importance of understanding the enzyme's structure and function.The ciliate Tetrahymena thermophila has long been used as a model system to study telomerase activity. Tetrahymena telomerase is comprised of a 159-nucleotide RNA subunit, a 133-kDa telomerase reverse transcriptase (TERT), and multiple protein cofactors (7). The RNA has a conserved secondary structure (Fig. 1A) that contains a template region, which serves as template for the telomeric repeat synthesis, flanked upstream by the template boundary element (TBE) and downstream by a putative pseudoknot, as well as a highly structured region made of stems I and IV (8-10). TERT, the catalytic subunit, binds telomerase RNA in the TBE region, the template recognition element, and the loop of stem IV (10-13) (Fig. 1A) . Of the multiple Tetrahymena telomerase cofactors identified to date, only p65 binds the RNA directly in the stem I-proximal stem IV region (Fig. 1A) and promotes the hierarchical telomerase RNP assembly (14-16).Past studies have suggested that the putative pseudoknot region downstream of the template is a conserved and functionally important segment of telomerase RNA. Phylogenetic analyses of ciliate (9, 17), yeast (18-20), and vertebrate (21) RNAs suggest that this region may fold into a pse...