We have previously shown that the N-terminal domain of hepatitis delta virus (NdAg) has an RNA chaperone activity in vitro (Huang, Z. S., and Wu, H. N. (1998) J. Biol. Chem. 273, 26455-26461). Here we investigate further the basis of the stimulatory effect of NdAg on RNA structural rearrangement: mainly the formation and breakage of base pairs. Duplex dissociation, strand annealing, and exchange of complementary RNA oligonucleotides; the hybridization of yeast U4 and U6 small nuclear RNAs and of hammerhead ribozymes and cognate substrates; and the cis-cleavage reaction of hepatitis delta ribozymes were used to determine directly the role of NdAg in RNA-mediated processes. The results showed that NdAg could accelerate the annealing of complementary sequences in a selective fashion and promote strand exchange for the formation of a more extended duplex. These activities would prohibit NdAg from modifying the structure of a stable RNA, but allow NdAg to facilitate a trans-acting hammerhead ribozyme to find a more extensively matched target in cognate substrate. These and other results suggest that hepatitis delta antigen may have a biological role as an RNA chaperone, modulating the folding of viral RNA for replication and transcription.