The Escherichia coli DNA polymerase III gamma complex clamp loader assembles the ring-shaped beta sliding clamp onto DNA. The core polymerase is tethered to the template by beta, enabling processive replication of the genome. Here we investigate the DNA substrate specificity of the clamp-loading reaction by measuring the pre-steady-state kinetics of DNA binding and ATP hydrolysis using elongation-proficient and deficient primer/template DNA. The ATP-bound clamp loader binds both elongation-proficient and deficient DNA substrates either in the presence or absence of beta. However, elongation-proficient DNA preferentially triggers gamma complex to release beta onto DNA with concomitant hydrolysis of ATP. Binding to elongation-proficient DNA converts the gamma complex from a high affinity ATP-bound state to an ADP-bound state having a 10(5)-fold lower affinity for DNA. Steady-state binding assays are misleading, suggesting that gamma complex binds much more avidly to non-extendable primer/template DNA because recycling to the high affinity binding state is rate-limiting. Pre-steady-state rotational anisotropy data reveal a dynamic association-dissociation of gamma complex with extendable primer/templates leading to the diametrically opposite conclusion. The strongly favored dynamic recognition of extendable DNA does not require the presence of beta. Thus, the gamma complex uses ATP binding and hydrolysis as a mechanism for modulating its interaction with DNA in which the ATP-bound form binds with high affinity to DNA but elongation-proficient DNA substrates preferentially trigger hydrolysis of ATP and conversion to a low affinity state.