An activity that unwinds double-stranded RNA has been reported to exist in several organisms. We have analyzed the RNA intermediates and final products of the unwinding reaction. Although the RNA becomes sensitive to single strand-specific ribonucleases during the reaction, the duplex is never completely unwound. Furthermore, the base pairing properties of the RNA are permanently altered; the reacted RNA cannot rehybridize to form the original duplex. We demonstrate that during the reaction many, but not all, of the adenosine residues are converted to inosine residues, and we propose that the covalent modification is responsible for the irreversible change in base pairing properties. Possible biological roles for the unwinding/modifying activity, as well as its relevance to antisense RNA experiments, are discussed.