The three-dimensional structure of bacteriophage T7 DNA polymerase reveals the presence of a loop of 4 aa (residues 401-404) within the DNA-binding groove; this loop is not present in other members of the DNA polymerase I family. A genetically altered T7 DNA polymerase, T7 polDelta401-404, lacking these residues, has been characterized biochemically. The polymerase activity of T7 polDelta401-404 on primed M13 single-stranded DNA template is one-third of the wild-type enzyme and has a 3'-to-5' exonuclease activity indistinguishable from that of wild-type T7 DNA polymerase. T7 polDelta401-404 polymerizes nucleotides processively on a primed M13 single-stranded DNA template. T7 DNA polymerase cannot initiate de novo DNA synthesis; it requires tetraribonucleotides synthesized by the primase activity of the T7 gene 4 protein to serve as primers. T7 primase-dependent DNA synthesis on single-stranded DNA is 3- to 6-fold less with T7 polDelta401-404 compared with the wild-type enzyme. Furthermore, the altered polymerase is defective (10-fold) in its ability to use preformed tetraribonucleotides to initiate DNA synthesis in the presence of gene 4 protein. The location of the loop places it in precisely the position to interact with the tetraribonucleotide primer and, presumably, with the T7 gene 4 primase. Gene 4 protein also provides helicase activity for the replication of duplex DNA. T7 polDelta401-404 and T7 gene 4 protein catalyze strand-displacement DNA synthesis at nearly the same rate as does wild-type polymerase and T7 gene 4 protein, suggesting that the coupling of helicase and polymerase activities is unaffected.