Incubation of extracts of phi 29-infected Bacillus subtilis with [alpha-32P]dATP produced a labeled protein having the electrophoretic mobility of p3, the 5'-terminal protein of phi 29 DNA. The reaction product was resistant to treatment with micrococcal nuclease, phosphatase, and RNases A and T1 and sensitive to proteinase K. Incubation of the 32P-labeled protein with piperidine under conditions in which the phi 29 DNA-protein p3 linkage is hydrolyzed released 5'-dAMP. The reaction with [alpha-32P]dATP was strongly inhibited by anti-p3 serum and required the preence of phi 29 DNA-protein p3 complex; no reaction took place with proteinase K-treated phi29 DNA. These results, together with those of acid hydrolysis and partial proteolysis, indicated that a covalent complex between protein p3 and 5'-dAMP is formed in vitro. The initiation complex (protein p3-dAMP) formed in the presence of 0.5 microM [alpha-32P]dATP can be elongated by addition of 40 microM dNTPs. Treatment with piperidine of the product elongated in the presence of 2',3'-dideoxycytidine 5'-triphosphate released the expected oligonucleotides, 9 and 12 bases long, taking into account the sequence at the left and right DNA ends, respectively.