Various DNA sequences that interfere with transcription due to their unusual structural properties have been implicated in the regulation of gene expression and with genomic instability. An important example is sequences containing G-rich homopurine-homopyrimidine stretches, for which unusual transcriptional behavior is implicated in regulation of immunogenesis and in other processes such as genomic translocations and telomere function. To elucidate the mechanism of the effect of these sequences on transcription we have studied T7 RNA polymerase transcription of G-rich sequences in vitro. We have shown that these sequences produce significant transcription blockage in an orientation-, length- and supercoiling-dependent manner. Based upon the effects of various sequence modifications, solution conditions, and ribonucleotide substitutions, we conclude that transcription blockage is due to formation of unusually stable RNA/DNA hybrids, which could be further exacerbated by triplex formation. These structures are likely responsible for transcription-dependent replication blockage by G-rich sequences in vivo.