In the presence of RNA polymerase, RNase H, discriminatory factors alpha and beta, Escherichia coli binding protein, DNA elongation factor I, DNA elongation factor II preparation, DNA polymerase III, and ATP, UTP, GTP, CTP, dATP, dTTP, dGTP, and dCTP, fd viral DNA can be quantitatively converted to RFII containing a unique gap in the linear minus strand. This gap, mapped with the aid of restriction endonucleases HinII and HpaII, is located within Fragment Hpa-H of the fd genome. The discrimination reaction has been resolved into two steps: Step A, fd viral DNA, E. coli binding protein, and discriminatory factors alpha and beta form a protein DNA complex; Step B, the complex isolated by agarose gel filtration selectively forms fd RFII when supplemented with RNase H, RNA polymerase, and the DNA elongation proteins. The omission of any of the proteins described above during the first reaction resulted in either no discrimination or a decrease in discrimination when the missing protein was added during the second step. Results are presented which indicate that E. coli binding protein, discriminatory factors alpha and beta, and RNase H must be present during the time RNA synthesis occurs in order to selectively form RFII from fd DNA and not phiX RFII. The amount of fd and phiX174 RNA-DNA hybrid formed in vitro is directly related to the DNA synthesis observed. Thus, under discriminatory conditions, only fd viral DNA leads to fd RNA-DNA complexes and no phiX RNA-DNA hybrid is formed. Under nondiscriminatory conditions, both DNAs yield RNA-DNA hybrids and DNA synthesis. In the absence of discriminatory factor alpha, no RNA-DNA hybrid is formed with either DNA, and in turn, no DNA synthesis is detected with either DNA template.