We have purified wild type and exonuclease-deficient four-subunit DNA polymerase epsilon (Pol epsilon) complex from Saccharomyces cerevisiae and analyzed the fidelity of DNA synthesis by the two enzymes. Wild type Pol epsilon synthesizes DNA accurately, generating single-base substitutions and deletions at average error rates of </=2 x 10-5 and </=5 x 10-7, respectively. Pol epsilon lacking 3' --> 5' exonuclease activity is less accurate to a degree suggesting that wild type Pol epsilon proofreads at least 92% of base substitution errors and at least 99% of frameshift errors made by the polymerase. Surprisingly the base substitution fidelity of exonuclease-deficient Pol epsilon is severalfold lower than that of proofreading-deficient forms of other replicative polymerases. Moreover the spectrum of errors shows a feature not seen with other A, B, C, or X family polymerases: a high proportion of transversions resulting from T.dTTP, T.dCTP, and C.dTTP mispairs. This unique error specificity and amino acid sequence alignments suggest that the structure of the polymerase active site of Pol epsilon differs from those of other B family members. We observed both similarities and differences between the spectrum of substitutions generated by proofreading-deficient Pol epsilon in vitro and substitutions occurring in vivo in a yeast strain defective in Pol epsilon proofreading and DNA mismatch repair. We discuss the implications of these findings for the role of Pol epsilon polymerase activity in DNA replication.