RNA-binding proteins regulate all aspects of RNA metabolism. Their association with RNA is mediated by RNA-binding domains, of which many remain uncharacterized. A recently reported example is the NHL domain, found in prominent regulators of cellular plasticity like the C. elegans LIN-41. Here we employ an integrative approach to dissect the RNA specificity of LIN-41. Using computational analysis, structural biology, and in vivo studies in worms and human cells, we find that a positively charged pocket, specific to the NHL domain of LIN-41 and its homologs (collectively LIN41), recognizes a stem-loop RNA element, whose shape determines the binding specificity. Surprisingly, the mechanism of RNA recognition by LIN41 is drastically different from that of its more distant relative, the fly Brat. Our phylogenetic analysis suggests that this reflects a rapid evolution of the domain, presenting an interesting example of a conserved protein fold that acquired completely different solutions to RNA recognition.