Genomic RNA encapsidation in lentiviruses is a highly selective and regulated process. The unspliced RNA molecules are selected for encapsidation from a pool of many different viral and cellular RNA species. Moreover, two molecules are encapsidated per viral particle, where they are found associated as a dimer. In this study, we demonstrate that a 10-nucleotide palindromic sequence (pal) located at the 3′ end of the ψ encapsidation signal is critical for human immunodeficiency virus type 2 (HIV-2) replication and affects genomic RNA encapsidation. We used short-term and long-term culture of pal-mutated viruses in permissive C8166 cells and their phenotypic reversion to show the existence of a structurally extended SL1 during HIV-2 replication, formed by the interaction of the 3′ end of the pal within ψ with a motif located downstream of SL1. The stem extending HIV-2 SL1 is structurally similar to stem B described for HIV-1 SL1. Despite the high degree of phylogenetic conservation, these results show that mutant viruses are viable when the autocomplementary nature of the pal sequence is disrupted, but not without a stable stem B. Our observations show that formation of the extended SL1 is necessary during viral replication and positively affects HIV-2 genomic RNA encapsidation. Sequestration of part of the packaging signal into SL1 may be a means of regulating its presentation during the replication cycle.