We have examined the mechanism of DNA polymerase beta (pol beta) lesion discrimination using alkylated dNTP versus alkylated DNA template substrates and the pol beta variants R253M and E249K. Both of these amino acid variants are located in the loop region of the palm domain and are known to play a role in pol beta fidelity and discrimination of 3'-azido-3'-deoxythymidine triphosphate substrates. We observed that these variants affect O(6)-methyldeoxyguanosine- (m6G-) modified dNTP discrimination without affecting m6G template translesion synthesis. Under steady-state conditions, the ratio of inherent reactivity values for the m6dGTP substrate relative to the dGTP substrate was greater for both variant polymerases than for wild-type (WT) pol beta. Biochemical assays of translesion synthesis using m6G lesion-containing templates demonstrated no significant differences between the variants and WT. Using N-methyl-N-nitrosourea- (MNU-) modified DNA templates in the HSV-tk in vitro assay, no difference among the enzymes in the frequency of alkylation-induced G to A transition mutations was observed. However, differences among the polymerases in the frequency of alkylation-induced C to A transversions were observed, consistent with a mutator tendency for E249K and an antimutator tendency for R253M. We conclude that a specific interaction at the loop of the palm domain is involved in pol beta discrimination of the m6G lesion when present on the incoming dNTP substrate but not when present in the DNA template. Our data support a role for the flexible loop in pol beta error discrimination.