The 77-nucleotide OOP antisense RNA of bacteriophage lambda complements lambda cII-O mRNA in a region that includes 55 nucleotides at the 3' end of the cII gene and 22 nucleotides in the intercistronic region between the cII and O genes. OOP RNA, produced from multicopy plasmids, inhibits lambda cII gene expression by approximately 100-fold through an RNase III-dependent mechanism. Using primer extension analysis of cellular RNA isolated from an induced lambda lysogen that contains an OOP DNA plasmid, we have identified a cleavage site in cII-O mRNA within the region of complementarity with OOP RNA, at 13 nucleotides from the 3' end of that region. Ribonuclease protection experiments demonstrate that almost all cII-O mRNA in this overlap region is cleaved when OOP RNA is overproduced in RNase III+ cells but not in RNase III- cells. RNA fragments are detected that extend into the O gene from the cleavage sites, while the sister fragments that extend into the cII gene cannot be detected and must be eliminated by additional hydrolytic events. Differences in levels of uncleaved mRNA between RNase III+ and RNase III- cells are much less at several hundred nucleotides to either side of the target region. An alternate OOP RNA-dependent hydrolytic process occurs in RNase III- cells that results in cleavages in one of two regions, one close to the cleavage site observed in RNase III+ cells, and the second several nucleotides beyond the end of the complementary region between OOP RNA and cII-O mRNA. In this latter case, the fragments that extend into the cII gene are stable, while the sister O gene fragments are destroyed, in direct contrast to the RNase III-dependent process.