The double-stranded RNA (dsRNA)-activated protein kinase (PKR) senses dsRNA produced during viral infection and halts cellular protein synthesis to block viral replication. How basal PKR activity is controlled in the absence of infection was unclear until the recent identification of a potential endogenous regulator, the cellular noncoding RNA 886 (nc886). However, nc886 adopts two distinct conformations for which the structural details and potential functional differences remain unclear. Here, we isolated and separately dissected the function of each form of nc886 to more clearly define the molecular mechanism of nc886-mediated PKR inhibition. We show that nc886 adopts two stable, noninterconverting RNA conformers that are functionally nonequivalent using complementary RNA structure probing and mutational analyses combined with PKR binding and activity assays. One conformer acts as a potent inhibitor, while the other is a pseudoinhibitor capable of weakly activating the kinase. We mapped the nc886 region necessary for high affinity binding and potent inhibition of PKR to an apical stem–loop structure present in only one conformer of the RNA. This structural feature is not only critical for inhibiting PKR autophosphorylation, but also the phosphorylation of its cellular substrate, the eukaryotic translation initiation factor 2α subunit. The identification of different activities of the nc886 conformers suggests a potential mechanism for producing a gradient of PKR regulation within the cell and reveals a way by which a cellular noncoding RNA can mask or present a structural feature to PKR for inhibition.