3'-Untranslated region stem-loop structures are major determinants of chloroplast mRNA stability. The 3' stem-loop region of spinach petD precursor mRNA (pre-mRNA), a chloroplast gene encoding subunit IV of the cytochrome b6.f complex, forms a stable RNA-protein complex in vitro with chloroplast stem-loop binding proteins (CSPs) of 55, 41, and 29 kDa. We have previously purified CSP41 and cloned the corresponding cDNA. In vitro studies demonstrated that CSP41 is a bifunctional protein that displays both endoribonuclease and RNA-binding activities. In this work, the RNase activity of CSP41 is further characterized using the bacterially expressed protein. Our data show that CSP41 cleaves both single-stranded and double-stranded RNAs but not DNA. However, it exhibits a preference for stem-loop-containing RNAs. When the 3'-untranslated region of petD pre-mRNA is provided as a substrate, CSP41 specifically cleaves it within the stem-loop region, implying that CSP41 has an important role in the control of petD mRNA stability. Our data also show that the sequence-specific RNA-binding activity of CSP41 affects the rate, but not the specificity, of its RNase activity, suggesting that CSP41 is probably involved in other events of chloroplast RNA metabolism in addition to RNA degradation. By analyzing C-terminal deletions of CSP41, the RNase domain was located between amino acid residues 73 and 191.