Transcription of closed circular DNA templates in the presence of DNA gyrase is known to stimulate negative DNA supercoiling both in vivo and in vitro. It has proven elusive, however, to establish a general system in vitro that supports transcription-coupled DNA supercoiling (TCDS) by the "twin-domain" mechanism (Liu, L. F. and Wang, J. C. (1987) Proc. Natl. Acad. Sci. USA 84, 7024-7027) that operates in bacteria. In this report, we examine the properties of TCDS in defined protein systems that minimally contained T7 RNA polymerase and DNA gyrase. Specifically designed plasmid DNA templates permitted us to control the location and length of RNA transcripts. We demonstrate that TCDS takes place by two separate, and apparently independent, mechanistic pathways in vitro. The first supercoiling pathway, which is not likely to be significant in vivo, was found to be dependent on R-loop formation and could be suppressed by the presence of RNase H or bacterial HU protein. The second pathway for TCDS was much more potent, but became predominant in vitro only when sequence-specific DNA-bending proteins were present during transcription, and RNA transcript lengths exceeded 3 kb. This major supercoiling route was shown to be resistant to RNase H and had functional properties consistent with those predicted for the twin-domain mechanism. For example, DNA supercoiling activity was proportional to RNA transcript length and was greatly stimulated by macromolecular crowding agents. Under optimal conditions, the twin domain pathway of TCDS rapidly and efficiently generated superhelicity levels more than twice that typically found in vivo.