The 3 million-base pair genome of Sulfolobus solfataricus likely undergoes depurination/depyrimidination frequently in vivo. These unrepaired abasic lesions are expected to be bypassed by Dpo4, the only Y-family DNA polymerase from S. solfataricus. Interestingly, these error-prone Y-family enzymes have been shown to be physiologically vital in reducing the potentially negative consequences of DNA damage while paradoxically promoting carcinogenesis. Here we used Dpo4 as a model Y-family polymerase to establish the mechanistic basis for DNA lesion bypass. While showing efficient bypass, Dpo4 paused when incorporating nucleotides directly opposite and one position downstream from an abasic lesion because of a drop of several orders of magnitude in catalytic efficiency. Moreover, in disagreement with a previous structural report, Dpo4-catalyzed abasic bypass involves robust competition between the A-rule and the lesion loop-out mechanism and is governed by the local DNA sequence. Analysis of the strong pause sites revealed biphasic kinetics for incorporation indicating that Dpo4 primarily formed a nonproductive complex with DNA that converted slowly to a productive complex. These strong pause sites are mutational hot spots with the embedded lesion even affecting the efficiency of five to six downstream incorporations. Our results suggest that abasic lesion bypass requires tight regulation to maintain genomic stability.