Accurate DNA replication involves polymerases with high nucleotide selectivity and proofreading activity. We show here why both fidelity mechanisms fail when normally accurate T7 DNA polymerase bypasses the common oxidative lesion 8-oxo-7, 8-dihydro-2'-deoxyguanosine (8oG). The crystal structure of the polymerase with 8oG templating dC insertion shows that the O8 oxygen is tolerated by strong kinking of the DNA template. A model of a corresponding structure with dATP predicts steric and electrostatic clashes that would reduce but not eliminate insertion of dA. The structure of a postinsertional complex shows 8oG(syn).dA (anti) in a Hoogsteen-like base pair at the 3' terminus, and polymerase interactions with the minor groove surface of the mismatch that mimic those with undamaged, matched base pairs. This explains why translesion synthesis is permitted without proofreading of an 8oG.dA mismatch, thus providing insight into the high mutagenic potential of 8oG.