The genotoxic effects of the potent mutagenic carcinogen aflatoxin B1 (AFB1) are believed to be mediated by its reaction with the N-7 atom of guanine residues in DNA. We have analyzed the effect of AFB1-induced chemical modification on the template function of single-stranded DNA in vitro. The experimental strategy involves the elongation of a primer on a modified template by Escherichia coli DNA polymerase I (large fragment) and analysis of the products by high-resolution gel electrophoresis. Our data show that (i) AFB1 induces specific replication blocks one nucleotide 3' to the sites of occurrence of guanine residues on template DNA; (ii) AFB1-induced replication blocks occur predominantly at sequences capable of participation in intrastrand base pairing; (iii) within the intrastrand base-paired regions there are strong sequence context effects, in accordance with the previously described [Muench, K. F., Misra, R. P. & Humayun, M. Z. (1983) Proc. Natl. Acad. Sci. USA 80, 6-10] specificity "rules" that apply to the reaction of AFB1 with guanine residues in double-stranded DNA; (iv) there is evidence that the (7-guanyl)-AFB1 adducts as well as secondary derivatives such as the formamidopyrimidine-AFB1 act as replication blocks. In summary, these data suggest that previously observed inhibition of DNA replication and transcription by AFB1 is directly attributable to (7-guanyl)-AFB1 adducts or their secondary reaction products.