Stem-loop DNA hairpins containing a 5-base-pair (bp) stem and single-stranded polythymidine loop were investigated using thermodynamic melting analysis and stopped-flow kinetics. These studies revealed the thermodynamic stability and folding kinetics as a function of loop length and counterion concentration. Our results show the unusually high thermodynamic stability for tetraloop or 4 poly(dT) loop hairpin as compared with longer loop length hairpins. Furthermore, this exceptional stability is highly counterion-dependent. For example, in the higher counterion concentration regime of 50 mM NaCl and above, the tetraloop hairpin displays enhanced stability as compared with longer loop length hairpins. However, at lower counterion concentration of 25 mM NaCl and below, the thermal stability of tetraloop hairpin is consistent with the longer loop hairpins. The enhanced stability of tetraloop hairpins at higher counterion concentration can be explained on the basis of the combined entropic effect of loop closure as well as base stacking in the loop regions. The stability of longer loop length hairpins at all counterion concentrations as well as tetraloop hairpin at lower counterion concentration can be explained on the basis of entropic effect of loop closure alone. The thermodynamic parameters at lower and higher counterion concentrations were determined to quantify the enhanced stability of base-stacking effects occurring at higher counterion concentrations. For example, for 100 mM NaCl, excess Gibbs energy and enthalpy due to base stacking within the tetraloops were measured to be -1.2 ± 0.14 and -3.28 ± 0.32 kcal/mol, respectively, whereas, no excess of Gibbs energy and enthalpy was observed for 0, 5, 10, and 25 mM NaCl. These findings suggest significant base-stacking interactions occurring in the loop region of the tetraloop hairpins at higher counterion concentration and less significant base-stacking interactions in the lower counterion concentration regime. We suggest that at higher counterion concentrations, hydrophobic collapse of the nucleotides in the loop may be enhanced due to the increased polarity of the solvent, thereby enhancing base-stacking interactions that contribute to unusually high stability.