A complete kinetic scheme describing the polymerization of correct and incorrect dNTPs by the Klenow fragment (KF) of DNA polymerase I has been developed by using short DNA oligomers of defined sequence. The high fidelity arises from a three-stage mechanism. The first stage of discrimination [(1.1 X 10(4-) greater than 1.2 X 10(6]-fold] comes primarily from a dramatically reduced rate of phosphodiester bond formation for incorrect nucleotides, but it also gains a smaller contribution from selective dNTP binding. After phosphodiester bond formation, a conformational change slows dissociation of the incorrect DNA products from KF and, in conjunction with editing by the 3'----5'-exonuclease, increases fidelity 4- greater than 61-fold. Finally, KF polymerizes the next correct dNTP onto a mismatch very slowly, providing a further 6- greater than 340-fold increase in fidelity. Surprisingly, the 3'----5'-exonuclease did not in its hydrolysis reaction differentiate between correctly and incorrectly base-paired nucleotides; rather, an increased lifetime of the enzyme-DNA complex containing the misincorporated base is responsible for discrimination.