The interaction of human immunodeficiency virus (HIV) nucleocapsid protein (NCp) with a substrate closely mimicking a retrovirus replication intermediate was studied. The heteroduplex substrate consisted of a DNA and RNA of 80 and 63 nucleotides, respectively. The nucleotides at the 3' end of the DNA were complementary to those at the 3' end of the RNA such that a hybrid region of 30 base pairs could form. HIV-reverse transcriptase (RT) extended the DNA and cleaved the RNA strand of the substrate. The rates of extension and cleavage were significantly decreased when the substrate was prebound with NCp before HIV-RT addition. In assays assessing the integrity of the substrate by measuring release of the DNA strand from the heteroduplex, prebinding with NCp protected the substrate when HIV-RT was added, a result consistent with resistance to RT-mediated cleavage. In contrast, NCp significantly decreased the thermal stability of the substrate as judged by incubation of the substrate at various temperatures. In strand transfer assays, a 189-nucleotide RNA (acceptor) with an internal region complementary to all 80 nucleotides of the substrate DNA was incubated with the substrate in the presence or absence of NCp. Nucleocapsid protein stimulated strand transfer in which the substrate RNA was displaced upon binding of the DNA to the acceptor. Results are discussed with respect to the role of NCp in retroviral recombination.