Three fibrillar collagen mRNAs, alpha1(I), alpha2(I), and alpha1(III), are coordinately upregulated in the activated hepatic stellate cell (hsc) in liver fibrosis. These three mRNAs contain sequences surrounding the start codon that can be folded into a stem-loop structure. We investigated the role of this stem-loop structure in expression of collagen alpha1(I) reporter mRNAs in hsc's and fibroblasts. The stem-loop dramatically decreases accumulation of mRNAs in quiescent hsc's and to a lesser extent in activated hsc's and fibroblasts. The stem-loop decreases mRNA stability in fibroblasts. In activated hsc's and fibroblasts, a protein complex binds to the stem-loop, and this binding requires the presence of a 7mG cap on the RNA. Placing the 3' untranslated region (UTR) of collagen alpha1(I) mRNA in a reporter mRNA containing this stem-loop further increases the steady-state level in activated hsc's. This 3' UTR binds alphaCP, a protein implicated in increasing stability of collagen alpha1(I) mRNA in activated hsc's (B. Stefanovic, C. Hellerbrand, M. Holcik, M. Briendl, S. A. Liebhaber, and D. A. Brenner, Mol. Cell. Biol. 17:5201-5209, 1997). A set of protein complexes assembles on the 7mG capped stem-loop RNA, and a 120-kDa protein is specifically cross-linked to this structure. Thus, collagen alpha1(I) mRNA is regulated by a complex interaction between the 5' stem-loop and the 3' UTR, which may optimize collagen production in activated hsc's.