DNA polymerases that initiate replication by protein-priming are able to catalyze terminal protein (TP)-primed initiation, the following transition steps and finally DNA-primed elongation. Therefore, their structures must be able to position sequentially both primers, TP and DNA, at a common binding site. For DNA-templated initiation, these DNA polymerases have to bind the origin of replication as template and TP as primer. It is likely that very precise interactions are required to position both TP and templating nucleotide at the polymerization active site. Such a specificity during TP-priming must rely on specific amino acids that must be evolutionarily conserved in this subfamily of DNA polymerases. By site-directed mutagenesis, we have analyzed the functional significance of Lys392 of phi29 DNA polymerase, immediately adjacent to the Kx3NSxYG motif, and specifically conserved among protein-primed DNA polymerases. During TP-primed initiation, mutations in this residue did not affect untemplated TP-dAMP formation, indicating that the interaction with the initiating nucleotide and TP were not affected, whereas the template-directed initiation activity was severely inhibited. Both mutant DNA polymerases had a wild-type-like (overall) DNA binding activity. We thus infer that residue Lys392 of phi29 DNA polymerase is important for the correct positioning of the templating nucleotide at the polymerization active site, a critical requirement during template-directed TP-priming at phi29 DNA origins. Consequently, mutation of this residue compromised the fidelity of the initiation reaction, not controlled by the 3'-5' exonuclease activity. During DNA-primed polymerization, the mutant polymerases showed a defect in translocation of the template strand. This translocation problem could be the consequence of a more general defect in the stabilization and positioning of a next templating nucleotide at the polymerization active site, during DNA-primed DNA synthesis.