DNA polymerase lambda (Pollambda), a member of the X-family DNA polymerases, possesses an N-terminal BRCT domain, a proline-rich domain, and a C-terminal polymerase beta-like domain (tPollambda). In this paper, we determined a minimal kinetic mechanism and the fidelity of tPollambda using pre-steady-state kinetic analysis of the incorporation of a single nucleotide into a one-nucleotide gapped DNA substrate, 21-19/41-mer (primer-primer/template). Our kinetic studies revealed an incoming nucleotide bound to the enzyme.DNA binary complex at a rate constant of 1.55 x 10(8) M(-1) s(-1) to form a ground-state ternary complex while the nucleotide dissociated from this complex at a rate constant of 300 s(-1). Since DNA dissociation from tPollambda (0.8 s(-1)) was less than 3-fold slower than polymerization, we measured saturation kinetics for all 16 possible nucleotide incorporations under single turnover conditions to eliminate the complication resulting from multiple turnovers. The fidelity of tPollambda was estimated to be in the range of 10(-2)-10(-4) and was sequence-dependent. Surprisingly, the ground-state binding affinity of correct (1.1-2.4 microM) and incorrect nucleotides (1.4-8.4 microM) was very similar while correct nucleotides (3-6 s(-1)) were incorporated much faster than incorrect nucleotides (0.001-0.2 s(-1)). Interestingly, the misincorporation of dGTP opposite a template base thymine (0.2 s(-1)) was more rapid than all other misincorporations, leading to the lowest fidelity (3.2 x 10(-2)) among all mismatched base pairs. Additionally, tPollambda was found to possess weak strand-displacement activity during polymerization. These biochemical properties suggest that Pollambda likely fills short-patched DNA gaps in base excision repair pathways and participates in mammalian nonhomologous end-joining pathways to repair double-stranded DNA breaks.