The retrohoming of the yeast mtDNA intron aI1 occurs by a target DNA-primed reverse transcription (TPRT) mechanism in which the intron RNA reverse splices directly into the recipient DNA and is then copied by the intron-encoded reverse transcriptase. Here, we carried out biochemical characterization of the intron-encoded reverse transcriptase and site-specific DNA endonuclease activities required for this process. We show that the aI1 reverse transcriptase has high TPRT activity in the presence of appropriate DNA target sites, but differs from the closely related reverse transcriptase encoded by the yeast aI2 intron in being unable to use artificial substrates efficiently. Characterization of TPRT products shows that the fully reverse spliced intron RNA is an efficient template for cDNA synthesis, while reverse transcription of partially reverse spliced intron RNA is impeded by the branch point. Novel features of the aI1 reaction include a prominent open-circular product in which cDNAs are incorporated at a nick at the antisense-strand cleavage site. The aI1 endonuclease activity, which catalyzes the DNA cleavage and reverse splicing reactions, is associated with ribonucleoprotein particles containing the intron-encoded protein and the excised intron RNA. As shown for the aI2 endonuclease, both the RNA and protein components are used for DNA target site recognition, but the aI1 protein has less stringent nucleotide sequence requirements for the reverse splicing reaction. Finally, perhaps reflecting this relaxed target specificity, in vitro experiments show that aI1 can reverse splice directly into ectopic mtDNA transposition sites, consistent with the previously suggested possibility that this mechanism is used for ectopic transposition of group II introns in vivo.