Neocarzinostatin (NCS), an antitumor protein antibiotic that causes strand scissions of DNA both in vitro and in vivo, is shown to lower the template activity of DNA for DNA polymerase Iin vitro. There is a correlation between the extent of strand scission and the degree of inhibition, maximal inhibition of the polymerase reaction being obtained under conditions promoting maximal strand scission. These effects can be related to the concentrations of NCS and of 2-mercaptoethanol and are maximized by pretreatment of the DNA with drug. Results from polymerase assays in which the amount of drug-treated DNA template was varied at a constant level of the enzyme suggest that the sites associated with NCS-induced breaks are nonfunctional in DNA synthesis but bind DNA polymerase I. The binding of the enzyme to the inactive sites is further confirmed using [203 Hg] polymerase. It is shown that the lowering of the template activity of DNA by NCS under conditions of strand scission is due to the generation of a large number of inactive sites that block, competitively, the binding of DNA polymerase to the active sites on the template. Furthermore, the inhibition of DNA synthesis, which depends on the extent of strand breakage and on the relative amounts of template and enzyme, can be reversed by increasing the levels of template or polymerase. The finding that DNA synthesis directed by poly [d(A-T)] is much more sensitive to NCS than that primed by poly [d(G-C)] suggests that the drug preferentially interacts at regions containing adenine and/or thymine residues.