Large RNAs collapse into compact intermediates in the presence of counterions before folding to the native state. We previously found that collapse of a bacterial group I ribozyme correlates with the formation of helices within the ribozyme core, but occurs at Mg2+ concentrations too low to support stable tertiary structure and catalytic activity. Here, using small-angle X-ray scattering, we show that Mg2+-induced collapse is a cooperative folding transition that can be fit by a two-state model. The Mg2+ dependence of collapse is similar to the Mg2+ dependence of helix assembly measured by partial ribonuclease T1 digestion and of an unfolding transition measured by UV hypochromicity. The correspondence between multiple probes of RNA structure further supports a two-state model. A mutation that disrupts tertiary contacts between the L9 tetraloop and its helical receptor destabilized the compact state by 0.8 kcal/mol, while mutations in the central triplex were less destabilizing. These results show that native tertiary interactions stabilize the compact folding intermediates under conditions in which the RNA backbone remains accessible to solvent.