The cold-shock protein CspB from Bacillus subtilis is a very small beta-barrel protein, which folds with a time constant of 1 ms (at 25 degrees C) in a U reversible N two-state reaction. To elucidate the energetics of this extremely fast reaction we investigated the folding kinetics of CspB as a function of both temperature and denaturant concentration between 2 and 45 degrees C and between 1 and 8 M urea. Under all these conditions unfolding and refolding were reversible monoexponential reactions. By using transition state theory, data from 327 kinetic curves were jointly analyzed to determine the thermodynamic activation parameters delta H H2O++, delta S H2O++, delta G H2O++, and delta C p H2O++ for unfolding and refolding and their dependences on the urea concentration. 90% of the total change in heat capacity and 96% of the change in the m value (m = d delta G/d[urea]) occur between the unfolded state and the activated state. This suggests that for CspB the activated state of folding is unusually well structured and almost equivalent to the native protein in its interactions with the solvent. As a consequence of this native-like activated state a strong temperature-dependent enthalpy/entropy compensation is observed for the refolding kinetics, and the barrier to refolding shifts from being largely enthalpic at low temperature to largely entropic at high temperature. This shift originates not from the changes in the folding protein chains itself, but from the changes in the protein-solvent interactions. We speculate that the absence of intermediates and the native-like activated state in the folding of CspB are correlated with the small size and the structural type of this protein. The stabilization of a small beta-sheet as in CspB requires extensive non-local interactions, and therefore incomplete sheets are unstable. As a consequence, the critical activated state is reached only very late in folding. The instability of partially folded structure is a means to avoid misfolding prior to the rate-limiting step, and a native-like activated state reduces the risk of non-productive side reactions during the final steps to the native state.