Bacterial transcription elongation factors GreA and GreB stimulate the intrinsic RNase activity of RNA polymerase (RNAP), thus helping the enzyme to read through pausing and arresting sites on DNA. Gre factors also accelerate RNAP transition from initiation to elongation. Here, we characterized the molecular mechanism by which Gre factors facilitate transcription at two Escherichia coli promoters, PrplN and PompX, that require GreA for optimal in vivo activity. Using in vitro transcription assays, KMnO(4) footprinting, and Fe(2+)-induced hydroxyl radical mapping, we show that during transcription initiation at PrplN and PompX in the absence of Gre factors, RNAP falls into a condition of promoter-proximal transcriptional arrest that prevents production of full-length transcripts both in vitro and in vivo. Arrest occurs when RNAP synthesizes 9-14-nucleotide-long transcripts and backtracks by 5-7 (PrplN) or 2-4 (PompX) nucleotides. Initiation factor sigma(70) contributes to the formation of arrested complexes at both promoters. The signal for promoter-proximal arrest at PrplN is bipartite and requires two elements: the extended -10 promoter element and the initial transcribed region from positions +2 to +6. GreA and GreB prevent arrest at PrplN and PompX by inducing cleavage of the 3'-proximal backtracked portion of RNA at the onset of arrested complex formation and stimulate productive transcription by allowing RNAP to elongate the 5'-proximal transcript cleavage products in the presence of substrates. We propose that promoter-proximal arrest is a common feature of many bacterial promoters and may represent an important physiological target of regulation by transcript cleavage factors.