As an initial step towards developing a widely applicable system for expressing small ribozymes (Rz) in various cell types using T7 RNA polymerase, we have replaced the loop domain of a natural prokaryotic antisense RNA (RNAout from Tn10), with hammerhead (Hh) Rz. RNAout was chosen, because the stem of its secondary structure gives it an unusually long half life in Escherichia coli which should also confer in vivo stability to small RNA sequences expressed within its loop domain. In order to define the 3' end of the Rz-RNAout chimeric RNAs, a poly(U) tract was inserted just 3' of the RNAout stem. Molecular analysis indicates that these RNAs function both as transcription terminators and Rz. In addition, the RNAs are stable in E. coli and can be expressed in mammalian cells. These results show that certain characteristics of a naturally evolved RNA, RNAout in this case, can be used to provide additional functions to short RNAs containing Hh Rz without disrupting the enzymatic activity of the Rz.