Ribosome biogenesis requires transcription of structural RNAs. In budding yeast, ribosomal units contain both 35S and 5S RNA genes separated by intergenic spacer sequences (IGS) that are transcribed by RNAP-II. IGS transcripts cause instability by promoting unequal sister chromatid recombination between repeats and are thus rapidly degraded by the exosome. Whether RNAP-II within IGS regions plays any functional role is unknown. Here we demonstrate that the bulk of RNAP-II bound to IGS sites is blocked for elongation and hence remains in a poised or stalled configuration. We describe a novel role for these stalled RNAP-II complexes in the formation of cis-interactions between the IGS of rDNA. We show that this function separates 35S and 5S RNA genes into polymerase-specific chromatin loops and demonstrate that removal of stalled RNAP-II complexes causes displacement of RNAP-III from the 5S gene region and transcriptional downregulation of 5S rRNA by spreading of RNAP-I. We conclude that stalled RNAP-II plays an active role in the cis-organisation of ribosomal repeats providing domains of polymerase specificity in the nucleolar transcription environment.