Based on a recent ternary complex crystal structure of human DNA polymerase beta with a G:A mismatch in the active site, we carried out a theoretical investigation of the catalytic mechanism of incorrect nucleotide incorporation using molecular dynamics simulation, quantum mechanics, combined quantum mechanics, and molecular mechanics methods. A two-stage mechanism is proposed with a nonreactive active-site structural rearrangement prechemistry step occurring before the nucleotidyl transfer reaction. The free energy required for formation of the prechemistry state is found to be the major factor contributing to the decrease in the rate of incorrect nucleotide incorporation compared with correct insertion and therefore to fidelity enhancement. Hence, the transition state and reaction barrier for phosphodiester bond formation after the prechemistry state are similar to that for correct insertion reaction. Key residues that provide electrostatic stabilization of the transition state are identified.