The S. cerevisiae RNase III enzyme Rnt1p preferentially binds to dsRNA hairpin substrates with a conserved (A/u)GNN tetraloop fold, via shape-specific interactions by its dsRBD helix α1 to the tetraloop minor groove. The solution structure of Rnt1p dsRBD bound to an AAGU-capped hairpin reveals that the tetraloop undergoes a structural rearrangement upon binding to Rnt1p dsRBD to adopt a backbone conformation that is essentially the same as the AGAA tetraloop, and indicates that a conserved recognition mode is used for all Rnt1p substrates. Comparison of free and RNA-bound Rnt1p dsRBD reveals that tetraloop-specific binding requires a conformational change in helix α1. To investigate whether conformational flexibility in the dsRBD regulates the binding specificity, I determined the backbone dynamics of the Rnt1p dsRBD in the free and AGAA hairpin-bound states using NMR spin relaxation experiments. The intrinsic μs-ms timescale dynamics of the dsRBD suggests that helix α1 undergoes conformational sampling in the free state, with large dynamics at some residues in the α1-β1 loop (α1- β1 hinge). These results, in combination with an RDC-refined solution structure of the free dsRBD, revealed that the Rnt1p dsRBD has an extended hydrophobic core comprising helix α1, the α1-β1 loop, and helix α3. Analysis of the backbone dynamics and structures of the free and bound dsRBD reveals that slow-timescale dynamics in the α1-β1 hinge are associated with concerted structural changes in the extended hydrophobic core that govern binding of helix α1 to AGAA tetraloops. The dynamic behavior of the dsRBD bound to a longer AGAA hairpin reveals that dynamics within the hydrophobic core differentiate between specific and non-specific sites. Mutations of residues in the α1-β1 hinge result in changes to the dsRBD stability and RNA-binding affinity, and cause defects in snoRNA processing in vivo. These results reveal that dynamics in the extended hydrophobic core are important for binding site selection by the Rnt1p dsRBD.