The DNA polymerase activity induced after bacteriophage T7 infection of Escherichia coli is found in a complex of two proteins, the T7 gene 5 protein and a host protein, thioredoxin. Gene 5 protein is a DNA polymerase and a 3' to 5' exonuclease. Thioredoxin binds tightly to the gene 5 protein and increases the processivity of polymerization some 1000-fold. Gene 5 protein forms a short-lived complex with the primer-template, poly(dA).oligo(dT), in the absence of Mg2+ and nucleotides. Thioredoxin increases the half-life of the preformed primer-template-polymerase complex from less than a second to approximately 5 min. The dissociation is accelerated by excess single-stranded DNA in an apparent second order reaction, indicating direct transfer of polymerase between DNA fragments. Thioredoxin also reduces the equilibrium dissociation constant, Kd, of the gene 5 protein -poly(dA).oligo(dT) complex 20- to 80-fold. The salt dependence of Kd indicates that thioredoxin stabilizes the primer-template-polymerase complex mainly through additional charge-charge interactions, increasing the estimated number of interactions from 2 to 7. The affinity of gene 5 protein for single-stranded DNA is at least 1000-fold higher than for double-stranded DNA and is little affected by thioredoxin. Under conditions of steady state synthesis the effect of thioredoxin on the polymerization rate is determined by two competing factors, an increase in processivity and a decrease of the dissociation rate of polymerase and replicated template.