A ribozyme derived from the intervening sequence (IVS) of the Tetrahymenit preribosomal RNA catalyzes a site-specific endonuclease reaction: G2CCCUCUA5 + G + G2CCCUCU + GAS (G = guanosine). This reaction is analogous to the first step in self-splicing of the pre-rRNA, with the product G2CCCUCU analogous to the 5'-exon. The following mechanistic conclusions have been derived from pre-steady-state and steady-state kinetic measurements at 50 " C and neutral pH in the presence of 10 mM Mg2+. The value of k,,/Km = 9 X lo7 M-' min-' for the oligonucleotide substrate with saturating G represents rate-limiting binding. This rate constant for binding is of the order expected for formation of a RNAaRNA duplex between oligonucleotides. (Phylogenetic and mutational analyses have shown that this substrate is recognized by base pairing to a complementary sequence within the IVS.) The value of k, , = 0.1 min-' represents rate-limiting dissociation of the 5'-exon analogue, G2CCCUCU. The product GAS dissociates first from the ribozyme because of this slow off-rate for G2CCCUCU. The similar binding of the product, G2CCCUCU, and the substrate, G2CCCUCUAS, to the 5'-exon binding site of the ribozyme, with Kd = 1-2 nM, shows that the pAs portion of the substrate makes no net contribution to binding. Both the substrate and product bind -104-fold (6 kcal/mol) stronger than expected from base pairing with the 5'-exon binding site. Thus, tertiary interactions are involved in binding. Binding of G2CCCUCU and binding of G are independent. These and other data suggest that binding of the oligonucleotide substrate, G2CCCUCUA5, and binding of G are essentially random and independent. The rate constant for reaction of the ternary complex is calculated to be k, 350 m i d , a rate constant that is not reflected in the steady-state rate parameters with saturating G. The simplest interpretation is adopted, in which k, represents the rate of the chemical step. A site-specific endonuclease reaction catalyzed by the Tetrahymena ribozyme in the absence of G was observed; the rate of the chemical step with solvent replacing guanosine, k,(-G) = 0.7 m i d , is -500-fold slower than that with saturating guanosine. The value of k,,/Km = 6 X lo7 M-' m i d for this hydrolysis reaction is only slightly smaller than that with saturating guanosine, because the binding of the oligonucleotide substrate is predominantly rate-limiting in both cases. This ribozyme, which approaches the limiting values of k,,/Km for protein enzymes, can be considered to have achieved "catalytic perfection"