Escherichia coli tmRNA (transfer-messenger RNA) facilitates a trans-translation reaction in which a stalled ribosome on a terminatorless mRNA switches to an internal coding sequence in tmRNA, resulting in the addition of an 11 amino acid residue tag to the truncated protein that is a signal for degradation and in recycling of the stalled ribosome. A tmRNA secondary structure model with a partial tRNA-like structure and several pseudoknots was recently proposed. This report describes an extensive mutational analysis of one predicted pseudoknot (PK1) located upstream of the E. coli tmRNA tag-encoded sequence. Both the extent of aminoacylation and the alanine incorporation into the tag sequence, reflecting the two functions of tmRNA, were measured in vitro for all the engineered RNA variants. To characterize structure-function relationships for the tmRNA mutants, their solution conformations were investigated by using structural probes and by measuring the temperature dependence of their UV absorbance. This analysis strongly supports the presence of a pseudoknot in E. coli tmRNA, and its involvement in trans-translation. Mutations disrupting the first stem of the pseudoknot inactivate function and promote stable alternative conformations. Mutations of the second stem of the pseudoknot also effect both functions. The nucleotide stretch between the two stems (loop 2) is required for efficient trans-translation, and nucleotides at positions 61 and 62 must be guanine residues. The probing data suggest the presence of magnesium ion(s) interacting with loop 2. The loops crossing the minor and major grooves can be mutated without significant effects on tmRNA function. Nucleotide insertion or deletion between the pseudoknot and the coding sequence do not change the mRNA frame of the tag-peptide sequence, suggesting that the pseudoknot structure is not a determinant for the resumption of translation.