Circular RNA is more stable than linear RNA both in vitro and in vivo because of its inaccessibility to exoribonucleases. Therefore, circularization of functional RNAs is a potentially useful methodology for designing therapeutic RNA reagents. We designed a circular hammerhead ribozyme that can cleave the template region of human telomerase RNA. This circular hammerhead ribozyme was generated by in vitro transcription followed by spontaneous self-circularization activity using the permuted intron-exon (PIE) method. Two-dimensional gel electrophoresis and alkaline digestion of the in vitro transcription products revealed that the circular hammerhead ribozyme could be produced by the PIE method. The purified circular hammerhead ribozyme cleaved the template region of human telomerase RNA in a magnesium-dependent manner. These results indicated that the circular hammerhead ribozyme generated by the PIE method maintained the specific feature of canonical hammerhead catalytic activity.