One of the final steps in the assembly of bacteriophage lambda is the excision of a single genome from a concatemeric DNA precursor and insertion of this monomer into a preformed capsid. Terminase enzymes are common to all of the double-stranded DNA phages, and in lambda this enzyme is responsible for both excision of a genome monomer from the concatemer and its insertion into the pro-capsid. We have previously demonstrated that the endonuclease activity of lambda terminase (cos-cleavage) was stoichiometric with enzyme and postulated that this was due to formation of a stable, postcleavage enzyme.DNA intermediate (complex I) (Tomka & Catalano, 1993b). Bacteriophage lambda gpFI protein is required for efficient assembly of the virus, and current models suggest that this protein increases the rate of pro-capsid binding to complex I. We show here that gpFI markedly stimulates cos-cleavage by lambda terminase, even in the absence of viral pro-capsids. Importantly, the observed increase in nicking activity did not result from an increase in the rate of cos-cleavage, but rather by an increase in turnover by the enzyme. These data suggest that gpFI destabilizes complex I, thus allowing terminase release from cos and catalytic turnover by the enzyme. The implications of these results with respect to terminase assembly onto viral DNA, nicking of the duplex, and subsequent translocation during packaging are discussed.