Hepatitis delta antigen (HDAg) is an RNA-binding protein with binding specificity for hepatitis delta virus (HDV) RNA (J. H. Lin, M. F. Chang, S. C. Baker, S. Govindarajan, and M. M. C. Lai, J. Virol. 64:4051-4058, 1990). By amino acid sequence homology search, we have identified within its RNA-binding domain two stretches of an arginine-rich motif (ARM), which is present in many prokaryotic and eukaryotic RNA-binding proteins. The first one is KERQDHRRRKA and the second is EDEKRERRIAG, and they are separated by 29 amino acids. Deletion of either one of these ARM sequences resulted in the total loss of the in vitro RNA-binding activity of HDAg. Thus, HDAg is different from other RNA-binding proteins in that it requires two ARM-like sequences for its RNA-binding activity. Replacement of the spacer sequence between the two ARMs with a shorter stretch of sequence also reduced RNA binding in vitro. Furthermore, site-specific mutations of the basic amino acid residues in both ARMs resulted in the total loss or reduction of RNA-binding activity. The biological significance of the RNA-binding activity was studied by examining the trans-activating activity of the RNA-binding mutants. The plasmids expressing HDAgs with various mutations in the RNA-binding motifs were cotransfected with a replication-defective HDV dimer cDNA construct into COS cells. It was found that all the HDAg mutants which had lost the in vitro RNA-binding activity also lost the ability to complement the defect of HDV RNA replication. We conclude that the trans-activating function of HDAg requires its binding to HDV RNA.