A 120-base phage phi29 encoded RNA (pRNA) has a novel role in DNA packaging. This pRNA possesses five single-base bulges, one three-base bulge, one bifurcation bulge, one bulge loop, and two stem loops. Circularly permuted pRNAs (cpRNA) were constructed to examine the function of these bulges and loops as well as their adjacent sequences. Each of the five single-base bulges was nonessential. The bifurcation bulge could be deleted and replaced with a new opening to provide flexibility for maintaining an overall correct folding in three-way junction. All of these nonessential bulges or their adjacent bases could be used as new termini for cpRNAs. The three-base (C18C19A20) bulge was dispensable for procapsid binding, but was indispensable for DNA packaging. The secondary structure around this CCA bulge and the phylogenetically conserved bases within or around it were investigated. Bases A14C15U16 were confirmed, by compensatory modification, to pair with U103G102A101. A99 was needed only to allow the proper folding of CCA bulge in the appropriate sequence order and distance constraints. Beyond these, the seemingly phylogenetic conservation of other bases has little role in pRNA activity. Each of the three stem loops was essential for procapsid binding, DNA packaging, and phage assembly. Disruption of the middle of any one of the loops resulted in dramatic reductions in procapsid binding, subsequent DNA packaging, and phage assembly activities. However, disruption of the loops at sequences that were close to double-stranded regions of the RNA did not interfere with pRNA activity significantly. Our results suggest that double-stranded helical regions near these loops were most likely not involved in interactions with components of the DNA-packaging machinery. Instead, these regions appear to be merely present to serve as a scaffolding to display the single-stranded loops that are important for pRNA tertiary structure or for interaction with the procapsid or other packaging components.