The DNA coding for replication control and incompatibility of the plasmid NR1 serves as a template in vivo and in vitro for RNA transcription in both directions. In the rightward direction, RNA synthesis begins from 2 different promoters, one of which is regulated and the other constitutive. In vivo, each of these transcripts is more than 1,000 nucleotides long, terminating near the estimated site for the origin of replication. These transcripts serve as messenger RNA for several proteins. One protein (repA1) is required for replication and another (repA2) serves as the repressor for the regulated rightward promoter. RNA synthesis in the leftward direction is constitutive and produces a single transcript of 91 nucleotides which is complementary in sequence to the rightward transcripts. This small transcript is the incompatibility product which regulates the replication of the plasmid. When the intracellular concentration of the small transcript is experimentally varied, the rate of translation of the rightward transcripts and the rate of initiation of replication (plasmid copy number) vary inversely to its concentration. The mode of action of this inhibitor RNA is likely to be formation of an RNA-RNA duplex with the rightward transcripts, thereby inhibiting the translation which would produce the required replication protein. The probability that a rightward transcript will escape interaction with the small RNA molecules and thus allow replication to initiate can be predicted from the laws of mass action based on base-stacking free energies for the likely sequences of initial contact. The estimated intracellular RNA concentrations, based on quantitative hybridization experiments, are agreement with those predicted from the calculated equilibrium constants for duplex formation.