The structure in solution of a 34-nucleotide RNA molecule, which contains the conserved panhandle sequences, were determined by NMR spectroscopy and molecular modeling. The partially double-stranded panhandle structure of the influenza virus RNA serves to regulate initiation and termination of viral transcription as well as polyadenylation. The panhandle RNA consists of internal loop flanked by short helices. The nucleotides at or near the internal loop are crucial for polymerase binding and transcriptional activity. Several differences from the wild-type sequences were introduced into the sequences of our model panhandle RNA in order to increase the synthesis yield when preparing the sample. We found that these modifications did not interfere with promoter activity and full length transcripts were made by the influenza RNA polymerase. The partially complementary 3``- and 5``-ends of the RNA form a double helical structure which is, on average, close to A-form. The stem contains bulges at nucleotides A10, A12 and C26 which are important polymerase binding and transcriptional activities. NMR results provide that C11 and G25 form a Watson-Crick base pair. Although residues A10 and A12 are stacked in the helix, the phosphodiester backbones are distorted. Residue C26 is not stacked in the helix but is shifted to the minor groove, perpendicular to the neighboring bases, and is believed to be stabilized by hydrogen bonds between an amino proton of C26 and N1 of A12 and between O2 of C26 and an amino proton of G25. However, we could not find direct NMR evidence for these hydrogen bonds. Residues A12, A13 and G25 show dynamic sugar conformations, and the backbone conformations of these nucleotides are flexible. This backbone conformation and its associated flexibility may be important for protein-RNA interactions as well as for base-specific interactions.