The accepted model of retroviral reverse transcription includes a circular DNA intermediate which requires strand displacement synthesis for linearization and creation of an integration-competent, long terminal repeat-flanked DNA product. We have used an in vitro model of this last step of reverse transcription to examine the role of the viral enzyme, reverse transcriptase (RT), in displacement synthesis. We show that Moloney murine leukemia virus RT possesses an activity which allows for displacement synthesis through a minimum of 1,334 bp of duplex DNA--an extent much greater than that required during in vivo reverse transcription and over 25-fold greater than has been previously demonstrated for a viral RT. RT does not function as a helicase in the classical sense but appears to closely couple duplex DNA melting with synthesis-driven translocation of the enzyme. In the absence of synthesis, the unwound region created by a primer-positioned RT appears to be no greater than 2 bp and does not advance along the template. Additionally, RT does not utilize ATP or any deoxynucleoside triphosphate not directly encoded by the template strand to catalyze processive duplex unwinding at a nick; nor does binding of the enzyme unwind duplex DNA in the absence of a 3' terminus. The approximate maximum chain elongation rate during strand displacement synthesis by Moloney murine leukemia virus RT falls between 0.73 and 1.5 nucleotides per s at 37 degrees C. The RNase H activity of RT does not appear to play a role in displacement synthesis; however, a 181-amino-acid C-terminal truncation of RT displays a dramatically reduced ability to catalyze synthesis through duplex DNA.