Early events in the retroviral replication cycle include the conversion of viral genomic RNA into linear double-stranded DNA. This process is mediated by the reverse transcriptase (RT), a multifunctional enzyme that possesses RNA-dependent DNA polymerase, DNA-dependent DNA polymerase, and RNase H activities. In the course of studies of a recombinant RT of human immunodeficiency virus type 1 (HIV-1), we observed an additional, unexpected activity of the enzyme. The purified RT catalyzes a specific cleavage in HIV-1 RNA hybridized to tRNALys, the primer for HIV-1 reverse transcription. The cleavage at the primer binding site (PBS) of HIV RNA is dependent on the double-stranded structure of the HIV RNA-tRNALys complex. This RNase activity appears to be distinct from the RNase H activity of HIV-1 RT, as the substrate specificity and the products of the two activities are different. Moreover, Escherichia coli RNase H and avian myeloblastosis virus RT are unable to cleave the HIV RNA-tRNALys complex. We refer to this unusual activity as RNase D. Two lines of evidence indicate that the specific RNase D activity is an integral part of recombinant HIV RT. The specific RNase D activity comigrates with the other RT activities, DNA polymerase, and RNase H upon filtration on a Superose 6 gel column or chromatography on a phosphocellulose column. Moreover, three recombinant HIV-1 RT preparations expressed and purified in different laboratories by various procedures exhibit RNase D activity. Sequence analysis indicated that RNase D activity cleaves the substrate HIV-1 RNA-tRNALys at two distinct sites within the PBS sequence 5'-UGGCGCCCGA decreases ACAG decreases GGAC-3'. The sequence specificity of RNase D activity suggests that it might be involved in two stages during the reverse transcription process: displacement of the PBS to enable copying of tRNALys sequences into plus-strand DNA or to facilitate the second template switch, which was postulated to occur at the PBS sequence.