Protein-RNA interactions are crucially important for numerous cellular processes and often involve coupled folding and binding of peptide segments upon association. The Nut-utilization site (N)-protein of bacteriophages contains an N-terminal arginine-rich motif that undergoes such a folding transition upon binding to the boxB RNA hairpin loop target structure. Molecular dynamics (MD) free energy simulations were used to calculate the absolute binding free energy of the N-peptide of bacteriophage P22 in complex with the boxB RNA hairpin motif at different salt concentrations and using two different water force field models. We obtained good agreement with experiment also at different salt concentrations for the TIP4P-D water model that has a stabilizing effect on unfolded protein structures. It allowed us to estimate the free energy contribution resulting from restricting the molecules’ spatial and conformational freedom upon binding which makes a large opposing contribution to binding. In a second set of Umbrella Sampling simulations to dissociate/associate the complex along a separation coordinate we analyzed the onset of pre-orientation of the N-peptide and onset of structure formation relative to the RNA and its dependence on the salt concentration. Peptide orientation and conformational transitions are significantly coupled to the first contact formation between peptide and RNA. The initial contacts are mostly formed between peptide residues and the boxB hairpin loop nucleotides. A complete transition to an α -helical bound peptide conformation occurs only at a late stage of the binding process a few angstroms before the complexed state has been reached. However, the N-peptide orients also at distances beyond the contact distance such that the sizeable positive charge points towards the RNA’s center-of-mass. Our result may have important implications for understanding protein- and peptide-RNA complex formation frequently involving coupled folding and association processes.