The catalytic subunit (alpha) of mitochondrial DNA polymerase (pol gamma) shares conserved DNA polymerase and 3'-5' exonuclease active site motifs with Escherichia coli DNA polymerase I and bacteriophage T7 DNA polymerase. A major difference between the prokaryotic and mitochondrial proteins is the size and sequence of the region between the exonuclease and DNA polymerase domains, referred to as the spacer in pol gamma-alpha. Four gamma-specific conserved sequence elements are located within the spacer region of the catalytic subunit in eukaryotic species from yeast to humans. To elucidate the functional roles of the spacer region, we pursued deletion and site-directed mutagenesis of Drosophila pol gamma. Mutant proteins were expressed from baculovirus constructs in insect cells, purified to near homogeneity, and analyzed biochemically. We find that mutations in three of the four conserved sequence elements within the spacer alter enzyme activity, processivity, and/or DNA binding affinity. In addition, several mutations affect differentially DNA polymerase and exonuclease activity and/or functional interactions with mitochondrial single-stranded DNA-binding protein. Based on these results and crystallographic evidence showing that the template-primer binds in a cleft between the exonuclease and DNA polymerase domains in family A DNA polymerases, we propose that conserved sequences within the spacer of pol gamma may position the substrate with respect to the enzyme catalytic domains.