The mode of action of the RNase H activity from HIV-1 was analyzed with a purified recombinant p66/p51 reverse transcriptase RT/RNase H protein and RNA-DNA hybrid consisting of RNA harboring the polypurine tract (ppt) and three complementary synthetic DNA oligonucleotides. Upon incubation of this preformed RNA-DNA hybrid with the p66/p51 RT/RNase H, a cleavage pattern is observed that indicates endonucleolytic RNase H activity with some sequence specificity for the next to last nucleotide of the 3'-end of the ppt RNA and one cut within the ppt. The RNase H avoids cleavage of G or A stretches. During RNA-directed DNA synthesis the RNA is hydrolyzed in a concerted action of RT and RNase H whereby the RNase H exhibits endonuclease as well as 3'-5'-exonuclease activity. The distance between the active centers of the RT and RNase H corresponds to 18 base pairs of the RNA-DNA hybrid. Plus-strand DNA-directed DNA synthesis initiates exactly at the next to last nucleotide of the 3'-end of the ppt RNA by means of the RNase H activity.