Two-dimensional NMR 15N relaxation studies have been used to characterize the backbone dynamics and folding transition of the N-terminal SH3 domain of the protein drk (drkN SH3). The isolated drkN SH3 domain exists in equilibrium between a folded and an unfolded state in aqueous buffer and near neutral pH [Zhang et al. (1994) J. Biomol. NMR 4, 845]. The backbone dynamics of both the folded and unfolded states in this exchanging system have been determined and the rates of the folding transition estimated at 14 degrees C. For 12 residues, the values of the spectral density functions of the backbone amide bond vectors at a number of frequencies have been established. Results show that while the unfolded state has considerably greater dynamic behavior, the overall motional properties are consistent with it having a reasonably compact structure in solution. In contrast to the folded state, considerable variations are seen in the values of the spectral densities of the unfolded state as a function of residue number; these variations do not appear to be strongly correlated with structural elements in the folded state. The mean value of the exchange rate associated with the folding transition was determined to be 0.89 s-1, similar to previous measurements of the rate of formation of beta-structure.