To elucidate early stages in protein folding, we have adopted a fragment reconstitution method for small proteins. This approach is expected to provide nuclei for protein folding and to allow us to investigate folding mechanisms. In previous work [Kobayashi, N., et al. (1995) FEES Lett. 366, 99-103.] we demonstrated the association of two complementary fragments, derived from the immunoglobulin G-binding domain B1 of streptococcal Protein G, and showed the structural similarity between the reconstituted domain and the uncleaved wild-type domain. In this work we have further characterized the reconstituted domain as well as the uncleaved domain thermodynamically by means of differential scanning calorimetry (DSC) and circular dichroism (CD) measurements. Although composed of short peptide fragments not linked by covalent bonds, the reconstituted domain showed a typical folding/unfolding curve in both DSC and CD melting measurements and behaved like a globular protein. The domain was not very stable, and the small value of the Gibbs free energy corresponded to the class of the weakest protein-protein binding systems. The denaturation temperature of 0.78 mM solution was 313 K at pH 5.9 as measured by DSC, which was more than 40 degrees lower than the uncleaved domain. This apparent instability was primarily caused by entropic disadvantage attributed to a bimolecular reaction. The temperature dependence of the enthalpy change from the folded to the unfolded state was almost identical for the reconstituted domain and the uncleaved one. This indicates that most of the noncovalent intramolecular interactions stabilizing the native structure, such as hydrogen bonding and hydrophobic interactions, are regenerated in the reconstituted domain. By comparing the equilibrium constants of the reconstituted and uncleaved domains, we determined the effective concentration to be approximately 6 M at 298 K. Structure-based estimation of the thermodynamic properties from the values of accessible surface areas showed that approximately 35% of the total heat capacity change and approximately 25% of the total enthalpy change can be attributed to the interchain interaction at 298 K. Furthermore, the folding/unfolding equilibrium of beta-hairpin structure of the fragment 41-56 alone was also characterized. These analyses allow us to envision the microdomain folding mechanism of the Protein G B1 domain, in which segment 41-56 first forms a stable beta-hairpin structure and then collides with segment 1-40, followed by spontaneous folding of the whole molecule.