Formylation of initiator methionyl-tRNA by methionyl-tRNA formyltransferase (MTF) is important for initiation of protein synthesis in eubacteria. The determinants for formylation are clustered mostly in the acceptor stem of the initiator tRNA. Previous studies suggested that a 16 amino acid insertion loop, present in all eubacterial MTF's (residues 34-49 in the E. coli enzyme), plays an important role in specific recognition of the initiator tRNA. Here, we have analyzed the effect of site-specific mutations of amino acids within this region. We show that an invariant arginine at position 42 within the loop plays a very important role both in the steps of substrate binding and in catalysis. The kinetic parameters of the R42K and R42L mutant enzymes using acceptor stem mutant initiator tRNAs as substrates suggest that arginine 42 makes functional contacts with the determinants at the 3:70 and possibly also the 2:71 base pairs in the acceptor stem of the initiator tRNA. The kinetic parameters of the G41R/R42L double mutant enzyme are essentially the same as those of R42L mutant, suggesting that the requirement for arginine at position 42 cannot be fulfilled by an arginine at position 41. Along with other data, this result suggests that the insertion loop, which is normally unstructured and flexible, adopts a defined conformation upon binding to the tRNA.