Transcription of mouse rDNA in vitro proceeds by an ordered mechanism of at least three steps. The first reaction involves formation of stable preinitiation complexes (Wandelt, C., and Grummt, I., (1983) Nucleic Acids Res. 11, 3795-3809; Cizewski, V., and Sollner-Webb, B. (1983) Nucleic Acids Res. 11, 7043-7056). Such complexes form at reduced temperature and in the absence of nucleoside triphosphates. The data presented here identify a second intermediate in the process of initiatio. This intermediate, called the convertible complex, forms slowly or not at all at 10 degrees C. Formation of the convertible complex requires the presence of ATP plus CTP or the dinucleotide ApC. ATP may be replaced with 5'-adenylyl imidotriphosphate. It is concluded that formation of the convertible complex is associated with formation of the first phosphodiester bond of nascent pre-rRNA. In the presence of all four nucleoside triphosphates, the convertible complex undergoes conversion to an elongation complex. This represents the third discernible step in the transcription process. The elongation complex is distinguished from the convertible complex by virtue of the observation that formation of the latter is inhibited by heparin, Sarkosyl, and 150 mM KCl. The elongation complex is not significantly affected by any of these substances. Moreover, formation of the convertible complex requires the glucocorticoid-regulated initiation factor designated TFIC.