The gamma complex of the Escherichia coli DNA polymerase III holoenzyme assembles the beta sliding clamp onto DNA in an ATP hydrolysis-driven reaction. Interactions between gamma complex and primer/template DNA are investigated using fluorescence depolarization to measure binding of gamma complex to different DNA substrates under steady-state and presteady-state conditions. Surprisingly, gamma complex has a much higher affinity for single-stranded DNA (K(d) in the nM range) than for a primed template (K(d) in the microM range) under steady-state conditions. However, when examined on a millisecond time scale, we find that gamma complex initially binds very rapidly and with high affinity to primer/template DNA but is converted subsequently to a much lower affinity DNA binding state. Presteady-state data reveals an effective dissociation constant of 1.5 nM for the initial binding of gamma complex to DNA and a dissociation constant of 5.7 microM for the low affinity DNA binding state. Experiments using nonhydrolyzable ATPgammaS show that ATP binding converts gamma complex from a low affinity "inactive" to high affinity "active" DNA binding state while ATP hydrolysis has the reverse effect, thus allowing cycling between active and inactive DNA binding forms at steady-state. We propose that a DNA-triggered switch between active and inactive states of gamma complex provides a two-tiered mechanism enabling gamma complex to recognize primed template sites and load beta, while preventing gamma complex from competing with DNA polymerase III core for binding a newly loaded beta.DNA complex.