The DNA polymerase-primase from Drosophila lacks 3'----5' exonuclease activity. However, a potent exonuclease can be detected after separating the 182-kDa polymerase subunit from the other three subunits of the enzyme (73, 60, and 50 kDa) by glycerol gradient sedimentation in the presence of 50% ethylene glycol. The exonuclease activity cosediments with the polymerase subunit, suggesting that the two activities reside in the same polypeptide. The 3'----5' exonuclease excises mismatched bases at the 3' termini of primed synthetic and natural DNA templates. Excision of a mispaired base at the 3' terminus occurs at a 10-fold greater rate than excision of the correctly paired base. When replication fidelity is measured by the bacteriophage phi X174 am3 reversion assay, the isolated polymerase subunit is at least 100-fold more accurate than either the intact polymerase-primase or a complex of the 182- and 73-kDa subunits. These results suggest that the 3'----5' exonuclease functions as a proofreading enzyme during Drosophila DNA replication in vitro and very likely in vivo.