STEREO is a novel algorithm that discovers cis-regulatory RNA interactions by assembling complete and potentially overlapping same-strand RNA transcripts from tiling expression data. STEREO first identifies coherent segments of transcription and then discovers individual transcripts that; are consistent with the observed segments given intensity and shape constraints. We used STEREO to identify 1446 regions of overlapping transcription in two strains of yeast, including transcripts that; comprise a new form of molecular toggle switch that controls gene variegation.