To initiate gene transcription, RNA polymerase II (Pol II) requires the transcription factor IIB (B). Here we present the crystal structure of the complete Pol II–B complex at 4.3 Å resolution, and complementary functional data. The results indicate the mechanism of transcription initiation, including the transition to RNA elongation. Promoter DNA is positioned over the Pol II active centre cleft with the 'B-core' domain that binds the wall at the end of the cleft. DNA is then opened with the help of the 'B-linker' that binds the Pol II rudder and clamp coiled-coil at the edge of the cleft. The DNA template strand slips into the cleft and is scanned for the transcription start site with the help of the 'B-reader' that approaches the active site. Synthesis of the RNA chain and rewinding of upstream DNA displace the B-reader and B-linker, respectively, to trigger B release and elongation complex formation.