The type I DNA topoisomerase from vaccinia virus (vTopo) forms a reversible covalent 3'-phosphotyrosyl linkage with a single strand of duplex DNA at the preferred sequence 5'-(C/T)CCTTp downward arrowN(-1)N(-2)N(-3)-3'. The enzyme-DNA covalent adduct is recombinogenic in cells, because the nicked strand downstream of the cleavage site can dissociate and be replaced by another DNA strand, potentially resulting in genome rearrangements if the enzyme executes strand ligation. Topo I could play an active role in strand exchange, either by altering the kinetics or thermodynamics of DNA strand binding or by serving as a proofreading gate to prevent ligation of incoming DNA strands containing mismatches. To address these questions, we have measured the kinetic and thermodynamic parameters for strand annealing to a purified vaccinia Topo I-DNA (vTopo-DNA) covalent complex containing a single-strand overhang and then compared them with the same overhang duplex in the absence of vTopo. We found that vTopo accelerates the strand association rate by 2-fold but has no effect on the rate of strand dissociation. vTopo has a similar small effect on the annealing parameters of a series of DNA strands containing single mismatches. In contrast, single base mismatches at the -1, -2, or -3 positions decreased the forward rate and equilibrium constant for reversible strand ligation by 10-fold. These data establish that while vTopo is a bystander during the annealing step of strand exchange, the enzyme strongly discriminates against mismatches close to the cleavage site during the subsequent events leading to strand ligation. A mechanism emerges where vTopo oscillates between an open state where the downstream DNA segment does not interact with the enzyme and a closed state where catalytically important contacts are formed with this region. This oscillation between an open and closed state of the covalently bound enzyme is likely important for regulating the number of DNA superhelical turns that are removed during the lifetime of the covalent complex with supercoiled substrates.