Promoter recognition and local melting of DNA are key steps of transcription initiation catalyzed by RNA polymerase and initiation factors. From single molecule fluorescence resonance energy transfer studies of the yeast (Saccharomyces cerevisiae) mitochondrial RNA polymerase Rpo41 and its transcription factor Mtf1, we show that the pre-initiation complex is highly dynamic and undergoes repetitive opening–closing transitions that are modulated by Mtf1 and ATP. We found that Rpo41 alone has the intrinsic ability to bend the promoter but only very briefly. Mtf1 enhances bending/opening transition and suppresses closing transition, indicating its dual roles of nucleating promoter opening and stabilizing the open state. The cognate initiating ATP prolongs the lifetime of the open state, plausibly explaining the ‘ATP sensing mechanism’ suggested for the system. We discovered short-lived opening trials upon initial binding of Rpo41-Mtf1 before the establishment of the opening/closing equilibrium, which may aid in promoter selection before the formation of stable pre-initiation complex. The dynamics of open complex formation provides unique insights into the interplay between RNA polymerase and transcription factors in regulating initiation.