If the A-form helix is the major structural motif found in RNA, the loops that cap them constitute the second most important family of motifs. Among those, two are overrepresented, GNRA and UNCG tetraloops. Recent surveys of RNA structures deposited in the PDB show that GNRA and UNCG tetraloops can adopt tertiary folds that are very different from their canonical conformations, characterized by the presence of a U-turn of a Z-turn, respectively. Crystallographic data from both a lariat-capping (LC) ribozyme and a group II intron ribozyme reveal that a given UUCG tetraloop can adopt a distinct fold depending on its structural environment. Specifically, when the crystal packing applies relaxed constraints on the loop, the canonical Z-turn conformation is observed. In contrast, a highly packed environment induces “squashing” of the tetraloop by distorting its sugar-phosphate backbone in a specific way that expels the first and fourth nucleobases out of the loop, and falls in van der Waals distance of the last base pair of the helix, taking the place of the pair formed between the first and fourth residues in Z-turn loops. The biological relevance of our observations is supported by the presence of similarly deformed loops in the highly packed environment of the ribosome and in a complex between a dsRNA and a RNase III. The finding that Z-turn loops change conformation under higher molecular packing suggests that, in addition to their demonstrated role in stabilizing RNA folding, they may contribute to the three-dimensional structure of RNA by mediating tertiary interactions with distal residues.