Kinetic and equilibrium studies of the folding and unfolding of the SH3 domain of the PI3 kinase, have been used to identify a folding intermediate that forms after the rate-limiting step on the folding pathway. Folding and unfolding, in urea as well as in guanidine hydrochloride (GdnHCl), were studied by monitoring changes in the intrinsic fluorescence or in the far-UV circular dichroism (CD) of the protein. The two probes yield non-coincident equilibrium transitions for unfolding in urea, indicating that an intermediate, I, exists in equilibrium with native (N) and unfolded (U) protein, during unfolding. Hence, the equilibrium unfolding data were analyzed according to a three-state N <--> I <--> U mechanism. An intermediate is observed also in kinetic unfolding studies, and its presence leads to the unfolding reaction in urea as well as in GdnHCl, occurring in two steps. The fast step is complete within the initial 11 ms of unfolding and manifests itself in a burst phase change in fluorescence. At high concentrations of GdnHCl, the entire change in fluorescence during unfolding occurs during the 11 ms burst phase. CD measurements indicate, however, that I retains N-like secondary structure. An analysis of the kinetic and thermodynamic data, according to a minimal three-state N <--> I <--> U mechanism, positions I after the rate-limiting transition state, TS1, of folding, on the reaction coordinate of folding in GdnHCl. Hence, I is not revealed when folding is commenced from U, regardless of the nature of the probe used to follow the folding reaction. Interrupted unfolding experiments, in which the protein is unfolded transiently in GdnHCl for various lengths of time before being refolded, showed that I refolds to N much faster than does U, confirms the analysis of the direct folding and unfolding experiments, that I is formed after the rate-limiting step of refolding in GdnHCl.