Reverse transcription of the HIV-1 genome is a complex multi-step process. HIV-1 nucleocapsid protein (NC) is a nucleic acid chaperone protein that has been shown to greatly facilitate the nucleic acid rearrangements that precede the minus-strand transfer step in reverse transcription. NC destabilizes the highly structured transactivation response region (TAR) present in the R region of the RNA genome, as well as a complementary hairpin structure ("TAR DNA") at the 3'-end of the newly synthesized minus-strand strong-stop DNA ((-) SSDNA). Melting of the latter structure inhibits a self-priming (SP) reaction that competes with the strand transfer reaction. In an in vitro minus-strand transfer system consisting of a (-) SSDNA mimic and a TAR-containing acceptor RNA molecule, we find that when both nucleic acids are present, NC facilitates formation of the transfer product and the SP reaction is greatly reduced. In contrast, in the absence of the acceptor RNA, NC has only a small inhibitory effect on the SP reaction. To further investigate NC-mediated inhibition of SP, we developed a FRET-based assay that allows us to directly monitor conformational changes in the TAR DNA structure upon NC binding. Although the majority ( approximately 71%) of the TAR DNA molecules assume a folded hairpin conformation in the absence of NC, two minor "semi-folded" and "unfolded" populations are also observed. Upon NC binding to the TAR DNA alone, we observe a modest shift in the population towards the less-folded states. In the presence of the RNA acceptor molecule, NC binding to TAR DNA results in a shift of the majority of molecules to the unfolded state. These measurements help to explain why acceptor RNA is required for significant inhibition of the SP reaction by NC, and support the hypothesis that NC-mediated annealing of nucleic acids is a concerted process wherein the unwinding step occurs in synchrony with hybridization.