DNA repair pathways are essential for maintaining genome stability. DNA polymerase beta plays a critical role in base-excision repair in vivo. DNA polymerase lambda, a recently identified X-family homolog of DNA polymerase beta, is hypothesized to be a second polymerase involved in base-excision repair. The full-length DNA polymerase lambda is comprised of three domains: a C-terminal DNA polymerase beta-like domain, an N-terminal BRCA1 C-terminal domain, and a previously uncharacterized proline-rich domain. Strikingly, pre-steady-state kinetic analyses reveal that, although human DNA polymerase lambda has almost identical fidelity to human DNA polymerase beta, the C-terminal DNA polymerase beta-like domain alone displays a dramatic, up to 100-fold loss in fidelity. We further demonstrate that the non-enzymatic proline-rich domain confers the increase in fidelity of DNA polymerase lambda by significantly lowering incorporation rate constants of incorrect nucleotides. Our studies illustrate a novel mechanism, in which the DNA polymerase fidelity is controlled not by an accessory protein or a proofreading exonuclease domain but by an internal regulatory domain.