The DNA polymerase encoded by bacteriophage T5 has been reported previously to be processive and to catalyze extensive strand displacement synthesis. The enzyme, purified from phage-infected cells, did not require accessory proteins for these activities. Although T5 DNA polymerase shares extensive sequence homology with Escherichia coli DNA polymerase I and T7 DNA polymerase, it contains unique regions of 130 and 71 residues at its N and C termini, respectively. We cloned the gene encoding wild-type T5 DNA polymerase and characterized the overproduced protein. We also examined the effect of N- and C-terminal deletions on processivity and strand displacement synthesis. T5 DNA polymerase lacking its N-terminal 30 residues resembled the wild-type enzyme albeit with a 2-fold reduction in polymerase activity. Deletion of 24 residues at the C terminus resulted in a 30-fold reduction in polymerase activity on primed circular DNA, had dramatically reduced processivity, and was unable to carry out strand displacement synthesis. Deletion of 63 residues at the C terminus resulted in a 20,000-fold reduction in polymerase activity. The 3' to 5' double-stranded DNA exonuclease activity associated with T5 DNA polymerase was reduced by a factor of 5 in the polymerase truncated at the N terminus but was stimulated by a factor of 7 in the polymerase truncated at the C terminus. We propose a model in which the C terminus increases the affinity of the DNA for the polymerase active site, thus increasing processivity and decreasing the accessibility of the DNA to the exonuclease active site.