Sotah, Chapter 7, Mishnah 6. The next item the Mishnah listed earlier as being said in the holy tongue is Birkas Kohanim - the blessings with which the kohanim bless the Jewish people. The Mishnah opens by asking: "Birkas Kohanim keitzad". Here too the question is not about the source for saying the blessing in the holy tongue, but about describing how the mitzvah is actually carried out.
Three berachos outside the Mikdash and one berachah in the Mikdash:
"Bamedinah omrim osah shalosh berachos" - outside the Beis HaMikdash the blessing is said as three separate berachos, exactly as we do to this day:
"Yevarechecha Hashem v'yishmerecha" - and the people answer "Amen."
"Ya'er Hashem panav eilecha vichuneka" - and the people answer "Amen."
"Yisa Hashem panav eilecha v'yasem lecha shalom" - and the people answer "Amen."
"Uvamikdash berachah achas" - in the Beis HaMikdash the three verses were said as one continuous berachah, and the people responded only at the very end. The wording of the response was different as well: in the Mikdash they did not say "Amen" but "Baruch Hashem l'olam va'ed," and this was said only once, after all three verses - which shows that the three of them were counted as a single berachah.
Pronouncing Hashem's Name:
There is a further distinction between Birkas Kohanim in the Mikdash and Birkas Kohanim outside it: "Bamikdash omer es haShem k'chesavo" - in the Mikdash the kohanim would pronounce Hashem's Name as it is written, something we do not do at all. "Uvamedinah b'chinuyo" - outside the Mikdash the kohanim pronounce the Name by its substitute, the Name of lordship.
Raising the hands:
"Bamedinah kohanim nos'in es yedeihem k'neged k'seifeihen" - outside the Beis HaMikdash the kohanim raise their hands opposite their shoulders, at shoulder height.
"Uvamikdash al gabei rosheihen" - in the Beis HaMikdash the kohanim raised their hands above their heads.
"Chutz miKohen Gadol, she'eino magbiah es yadav l'ma'alah min hatzitz" - the Kohen Gadol wore the tzitz on his head, and on it were written the words "Kodesh laHashem." Because of the holiness of Hashem's Name on the tzitz, he would not raise his hands above it.
And the reason for the higher position in the Mikdash: in the Beis HaMikdash the Shechinah rested above the kohanim's fingers and the joints of their hands at the time of the blessing, and therefore they raised their hands above their heads.
"Rabbi Yehudah omer: af Kohen Gadol magbiah es yadav l'ma'alah min hatzitz" - Rabbi Yehudah disagrees and holds that even the Kohen Gadol would raise his hands above the tzitz. And the source for his words: "shene'emar: 'Vayisa Aharon es yadav el ha'am vay'varechem'" - Aharon raised his hands toward the nation and blessed it.
So the very concept of nesias kapayim - raising the hands - is learned from the Kohen Gadol, and Aharon was a Kohen Gadol who wore the tzitz. And since ordinary kohanim raise their hands above their heads, one must conclude, according to Rabbi Yehudah, that Aharon too, and every Kohen Gadol after him, raised his hands above his head, even though that is above the tzitz.
In summary: in this Mishnah we learned how Birkas Kohanim is performed and the differences between the Mikdash and outside it: three berachos with "Amen" outside the Mikdash as opposed to one berachah with the response "Baruch Hashem l'olam va'ed" in the Mikdash; pronouncing the Name as it is written in the Mikdash and by its substitute outside it; and raising the hands to shoulder height outside the Mikdash and above the head in the Mikdash, except for the Kohen Gadol because of the tzitz - and, according to Rabbi Yehudah's dissenting view, learned from Aharon, even the Kohen Gadol raises his hands above the tzitz.