Base pairing between the substrate and the ribozyme has previously been shown to be essential for catalytic activity of most ribozymes, but not for RNase P RNA. By using compensatory mutations we have demonstrated the importance of Watson-Crick complementarity between two well-conserved residues in Escherichia coli RNase P RNA (M1 RNA), G292 and G293, and two residues in the substrate, +74C and +75C (the first and second C residues in CCA). We suggest that these nucleotides base pair (G292/+75C and G293/+74C) in the ribozyme-substrate complex and as a consequence the amino acid acceptor stem of the precursor is partly unfolded. Thus, a function of M1 RNA is to anchor the substrate through this base pairing, thereby exposing the cleavage site such that cleavage is accomplished at the correct position. Our data also suggest possible base pairing between U294 in M1 RNA and the discriminator base at position +73 of the precursor. Our findings are also discussed in terms of evolution.