Transcription termination is essential to generate functional RNAs and to prevent disruptive polymerase collisions resulting from concurrent transcription. The yeast Sen1p helicase is involved in termination of most noncoding RNAs transcribed by RNA polymerase II (RNAPII). However, the mechanism of termination and the role of this protein have remained enigmatic. Here we address the mechanism of Sen1p-dependent termination by using a highly purified in vitro system. We show that Sen1p is the key enzyme of the termination reaction and reveal features of the termination mechanism. Like the bacterial termination factor Rho, Sen1p recognizes the nascent RNA and hydrolyzes ATP to dissociate the elongation complex. Sen1p-dependent termination is highly specific and, notably, does not require the C-terminal domain of RNAPII. We also show that termination is inhibited by RNA-DNA hybrids. Our results elucidate the role of Sen1p in controlling pervasive transcription.