Ion-mediated electrostatic interactions play an important role in RNA folding stability. For a RNA in a solution with higher Mg2+ ion concentration, more counterions in the solution can bind to the RNA, causing a strong many-body coupling between the bound ions. The many-body effect can change the effective potential of mean force between the tightly bound ions. This effect tends to dampen ion binding and lower RNA folding stability. Neglecting the many-body effect leads to a systematic error (over-estimation) of RNA folding stability at high Mg2+ ion concentrations. Using the tightly bound ion model combined with a conformational ensemble model, we investigate the influence of the many-body effect on the ion-dependent RNA folding stability. Comparisons with the experimental data indicate that including the many-body effect led to much improved predictions for RNA folding stability at high Mg2+ ion concentrations. The results suggest that the many-body effect can be important for RNA folding in high concentrations of multivalent ions. Further investigation showed that the many-body effect can influence the spatial distribution of the tightly bound ions and the effect is more pronounced for compact RNA structures and structures prone to the formation of local clustering of ions.