In the yeast Saccharomyces cerevisiae, distinct regions of the 1.2-kb telomerase RNA (TLC1) bind to the catalytic subunit Est2p and to accessory proteins. In particular, a bulged stem structure binds the essential regulatory subunit Est1p. We now show that the Est1p-binding domain of the RNA can be moved to three distant locations with retention of telomerase function in vivo. We present the Est1p relocation experiment in the context of a working model for the secondary structure of the entire TLC1 RNA, based on thermodynamic considerations and comparative analysis of sequences from four species. The model for TLC1 has three long quasihelical arms that bind the Ku, Est1p, and Sm proteins. These arms emanate from a central catalytic core that contains the template and Est2p-binding region. Deletion mutagenesis provides evidence that the Sm arm exists in vivo and can be shortened by 42 predicted base pairs with retention of function; therefore, precise positioning of Sm proteins, like Est1p, is not required within telomerase. In the best-studied ribonucleoprotein enzyme, the ribosome, the RNAs have specific three-dimensional structures that orient the functional elements. In the case of yeast telomerase, we propose that the RNA serves a very different function, providing a flexible tether for the protein subunits.