Conversion of human immunodeficiency virus type 1 (HIV-1) genomic RNA to viral DNA is a requisite step in the virus life cycle. This conversion is catalyzed by reverse transcriptase (RT) associated with a large nucleoprotein complex composed of several viral proteins including nucleocapsid (NC). To better characterize the biochemical mechanisms of viral DNA synthesis, we overexpressed and purified recombinant HIV-1 NC and studied its effect on the activity and processivity of HIV-1 RT during polymerization of HIV-1 template sequences in vitro. The effect of NC on steady-state RT activity was dependent on the order of addition of reaction components. Addition of NC prior to formation of RT-primer.template-dNTP ternary complexes inhibited primer extension and reduced total product yields by slowing steady-state RT turnover. In contrast, addition of NC to preformed ternary complexes resulted in efficient primer extension and increased RT processivity at specific DNA template sites. NC stimulated polymerization (2-4 times) through eight of 13 sites examined in the cRRE region of HIV-1 env and increased the rate of polymerization through the D3/CTS region of HIV-1 pol 10 times. The data suggest that NC affects RT processivity by facilitating polymerization through regions of template secondary structure. Thus, NC functions as a single-strand binding (SSB)-like accessory replication factor for RT in vitro and may be part of a multicomponent retroviral replication complex.