The functional relevance of a hairpin II‐containing structure of viroid RNA was studied by site‐directed mutagenesis, thermodynamic calculations, experimental denaturation curves and infectivity tests. Hairpin II is formed during thermal denaturation of circular viroids or as part of a metastable structure during synthesis of viroid replication intermediates. In potato spindle tuber viroid (PSTVd), eight single‐site mutations were generated in the segments which form hairpin II. From the mutated viroid cDNA clones, linear RNA transcripts of PSTVd unit length were synthesized. The relevance of hairpin II for the mechanism of denaturation was confirmed quantitatively by optical denaturation curves and temperature‐gradient gel electrophoresis. Infectivity tests showed that the mutations in the core region of hairpin II reverted to the wild type sequence whereas the mutations in the peripheral regions of hairpin II remained genetically stable. These data are in accordance with the natural variance of hairpin II in other viroids of the PSTVd class. Thus, the integrity of the core of hairpin II is critical for infectivity. Hairpin II exhibits a strong similarity in sequence as well as in three‐dimensional structure to certain DNA GC‐clusters found in the 5′‐upstream regions of some genes in man, animals, viruses and plants. A hypothesis about a function of hairpin II as a binding site for host cell transcription factors is proposed.