The retroviral replicating enzyme reverse transcriptase (RT) is associated with an RNase H which specifically hydrolyzes RNA in RNA-DNA hybrids. The RNase H exhibits endo- as well as exonuclease activity when analyzed with in vitro synthesized viral RNA hybridized to a shorter synthetic DNA oligonucleotide. In the presence of deoxyribonucleotides the RT synthesizes DNA in a concerted action with the RNase H, which simultaneously hydrolyzes the RNA template. Mutants of the RNase H derived by site-directed mutagenesis of a conserved histidine 539 are preferentially impaired in their exo- and less in their endonuclease activity. A specific polypurine-rich oligonucleotide created at the polypurine tract (PPT), serves as a primer for plus-strand DNA synthesis. Initiation of DNA synthesis at the PPT-primer can be demonstrated for the wt enzyme in vitro in contrast to the mt enzymes which do not recognize this sequence. A replication model based on these results is presented.