An inverted repeat (IR) within the U5 region of the Rous sarcoma virus (RSV) mRNA forms a structure composed of a 7-bp stem and a 5-nucleotide (nt) loop. This U5-IR structure has been shown to be required for the initiation of reverse transcription. The mRNA of Tf1, long terminal repeat-containing retrotransposon from fission yeast (Schizosaccharomyces pombe) contains nucleotides with the potential to form a U5-IR stem-loop that is strikingly similar to that of RSV. The putative U5-IR stem-loop of Tf1 consists of a 7-bp stem and a 25-nt loop. Results from mutagenesis studies indicate that the U5-IR stem-loop in the mRNA of Tf1 does form and that it is required for Tf1 transposition. Although the loop is required for transposition, we were surprised that the specific sequence of the nucleotides within the loop was unimportant for function. Additional investigation indicates that the loss of transposition activity due to a reduction in the loop size to 6 nt could be rescued by increasing the GC content of the stem. This result indicates that the large loop in the Tf1 mRNA relative to that of the RSV allows the formation of the relatively weak U5-IR stem. The levels of Tf1 proteins expressed and the amounts of Tf1 RNA packaged into the virus-like particles were not affected by mutations in the U5-IR structure. However, all of the mutations in the U5-IR structure that caused defects in transposition produced low amounts of reverse transcripts. A unique feature in the initiation of Tf1 reverse transcription is that, instead of a tRNA, the first 11 nt of the Tf1 mRNA serve as the minus-strand primer. Analysis of the 5' end of Tf1 mRNA revealed that the mutations in the U5-IR stem-loop that resulted in defects in reverse transcription caused a reduction in the cleavage activity required to generate the Tf1 primer. Our results indicate that the U5-IR stems of Tf1 and RSV are conserved in size, position, and function.