The protein-free terminal fragments HindIII B and L, from the left and right ends of phi 29 DNA, respectively, but not internal fragments of similar size, were active as templates in the formation of the p3-dAMP initiation complex in an in vitro system containing purified phi 29 terminal protein p3 and DNA polymerase p2, although the activity was lower than that obtained with the phi 29 DNA-p3 complex. These results indicate the existence of specific sequences at the ends of phi 29 DNA that allow the initiation of phi 29 DNA replication. The template activity of the protein-free terminal fragments was size dependent. The protein-free single strands of the HindIII L fragment were much less active than the corresponding double-stranded fragment. Terminal protein-DNA complexes of phages PZA and phi 15, with a terminal protein closely related to the phi 29 protein p3, were more active as templates in the initiation reaction with the purified phi 29 proteins than the corresponding protein-free DNAs, as it happens in the case of phi 29. However, the terminal protein-DNA complexes of phages Nf, B103, and GA-1, with a terminal protein less related or unrelated to the phi 29 protein p3, were essentially inactive and became active after removal of the parental terminal protein. These results strongly suggest that the parental terminal protein is the major signal in the template for the initiation of phi 29 DNA replication.