The overlapping transcription units constituting the rat insulin-like growth factor II (IGF-II) locus generate multiple mRNAs by using different promoters. Three promoters have been identified, giving rise to 4.6-, 3.8-, and 3.6-kilobase mRNAs. The latter, originating from promoter P3, is the most abundant IGF-II mRNA in the rat liver cell-line BRL-3A. Moreover, a non-polyadenylated 1.2-kilobase (kb) transcript and a 1.8-kb tail fragment are prominent transcripts at steady-state. In this study, we show that the 1.8-kb tail fragment is uncapped and sediments as a 30 S ribonucleoprotein particle, and is thus not actively engaged in protein synthesis. In contrast, both the 3.6-kb mRNA and the 1.2-kb transcript cosediment with polysomes. In the presence of cytoplasmic extracts, the full-length 3.6-kb mRNA is cleaved into the 1.8-kb tail fragment and a similar-sized upstream fragment. The cleavage occurs between a putative hairpin and a phylogenetically conserved guanosine-rich region which forms a stable higher order RNA structure in the presence of K+. We suggest that endonucleolysis is the initial step in IGF-II mRNA decay and that this event may participate in the post-transcriptional regulation of IGF-II production.