Tracking the structural and energetic changes in the pathways of DNA replication and repair is central to the understanding of these important processes. Here we report favorable mechanisms of the polymerase-catalyzed phosphoryl transfer reactions corresponding to correct and incorrect nucleotide incorporations in the DNA by using a novel protocol involving energy minimizations, dynamics simulations, quasi-harmonic free energy calculations, and mixed quantum mechanics/molecular mechanics dynamics simulations. Though the pathway proposed may not be unique and invites variations, geometric and energetic arguments support the series of transient intermediates in the phosphoryl transfer pathways uncovered here for both the G:C and G:A systems involving a Grotthuss hopping mechanism of proton transfer between water molecules and the three conserved aspartate residues in pol beta's active-site. In the G:C system, the rate-limiting step is the initial proton hop with a free energy of activation of at least 17 kcal/mol, which corresponds closely to measured k(pol) values. Fidelity discrimination in pol beta can be explained by a significant loss of stability of the closed ternary complex of the enzyme in the G:A system and much higher activation energy of the initial step of nucleophilic attack, namely deprotonation of terminal DNA primer O3'H group. Thus, subtle differences in the enzyme active-site between matched and mismatched base pairs generate significant differences in catalytic performance.