The protozoan parasite Toxoplasma gondii is an important human and veterinary pathogen. Asexual replication of T. gondii in humans and intermediate hosts is characterized by two forms: rapidly growing “tachyzoites” and latent “bradyzoite” tissue cysts. Tachyzoites are responsible for acute illness and congenital neurological birth defects, while the more slowly dividing bradyzoite form can remain latent within the tissues for many years, representing a threat to immunocompromised patients. We have developed a genetic screen to identify regulatory genes that control parasite differentiation and have isolated mutants that fail to convert to bradyzoites. One of these mutants has an insertion disrupting a locus that encodes a developmentally regulated non-coding RNA transcript, named Tg-ncRNA-1. Microarray hybridizations suggest that Tg-ncRNA-1 is involved in the early steps of bradyzoite differentiation. Since Tg-ncRNA-1 does not contain an open reading frame, we used the algorithm Coding Potential Calculator (CPC) that evaluates the protein-coding potential of a transcript, to classify Tg-ncRNA-1. The CPC results strongly indicate that Tg-ncRNA-1 is a non-coding RNA (ncRNA). Interestingly, a previously generated mutant also contains an insertion in Tg-ncRNA-1. We show that both mutants have a decreased ability to form bradyzoites, and complementation of both mutants with wild-type Tg-ncRNA-1 restores the ability of the parasites to differentiate. It has been shown that an important part of bradyzoite differentiation is transcriptionally controlled, but this is the first time that a non-coding RNA is implicated in this process.