The roles of the 3'- and 5'-terminal nucleotides and the panhandle structure of influenza B virus virion RNA were analyzed in vitro by transcription of model RNA templates with influenza B virus RNA polymerase. The results suggest that the stability of the panhandle and breathing of the extreme ends of the panhandle are important factors for efficient transcription. Influenza B virus polymerase appears to be more tolerant of mutations in the panhandle structure than influenza A virus polymerase. This is consistent with the greater degree of heterogeneity observed naturally in the 3'-terminal nucleotides of the virion RNA of influenza B virus than in influenza A virus.