An exonuclease-deficient mutant of T7 DNA polymerase was constructed and utilized in a series of kinetic studies on misincorporation and next correct dNTP incorporation. By using a synthetic oligonucleotide template-primer system for which the kinetic pathway for correct incorporation has been solved [Patel, S.S., Wong, I., & Johnson, K. A. (1991) Biochemistry (first of three papers in this issue)], the kinetic parameters for the incorporation of the incorrect triphosphates dATP, dCTP, and dGTP were determined, giving, respectively, kcat/Km values of 91, 23, and 4.3 M-1 s-1 and a discrimination in the polymerization step of 10(5)-10(6). The rates of misincorporation in all cases were linearly dependent on substrate concentration up to 4 mM, beyond which severe inhibition was observed. Competition of correct incorporation versus dCTP revealed an estimated Ki of approximately 6-8 mM, suggesting a corresponding kcat of 0.14s-1. Moderate elemental effects of 19-, 17-, and 34-fold reduction in rates were measured by substituting the alpha-thiotriphosphate analogues for dATP, dCTP, and dGTP, respectively, indicating that the chemistry step is partially rate-limiting. The absence of a burst of incorporation during the first turnover places the rate-limiting step at a triphosphate binding induced conformational change before chemistry. In contrast, the incorporation of the next correct triphosphate, dCTP, on a mismatched DNA substrate was saturable with a Km of 87 microM for dCTP, 4-fold higher than the Kd for the correct incorporation on duplex DNA, and a kcat of 0.025 s-1. A larger elemental effect of 60, however, suggests a rate-limiting chemistry step. The rate of pyrophosphorolysis on a mismatched 3'-end is undetectable, indicating that pyrophosphorolysis does not play a proofreading role in replication. These results show convincingly that the T7 DNA polymerase discriminates against the incorrect triphosphate by an induced-fit conformational change and that, following misincorporation, the enzyme then selects against the resultant mismatched DNA by a slow, rate-limiting chemistry step, thereby allowing sufficient time for the release of the mismatched DNA from the polymerase active site to be followed by exonucleolytic error correction.