Chromosomal DNA polymerases are tethered to DNA by a circular sliding clamp for high processivity. However, lagging strand synthesis requires the polymerase to rapidly dissociate on finishing each Okazaki fragment. The Escherichia coli replicase contains a subunit (tau) that promotes separation of polymerase from its clamp on finishing DNA segments. This report reveals the mechanism of this process. We find that tau binds the C-terminal residues of the DNA polymerase. Surprisingly, this same C-terminal "tail" of the polymerase interacts with the beta clamp, and tau competes with beta for this sequence. Moreover, tau acts as a DNA sensor. On binding primed DNA, tau releases the polymerase tail, allowing polymerase to bind beta for processive synthesis. But on sensing the DNA is complete (duplex), tau sequesters the polymerase tail from beta, disengaging polymerase from DNA. Therefore, DNA sensing by tau switches the polymerase peptide tail on and off the clamp and coordinates the dynamic turnover of polymerase during lagging strand synthesis.