Reverse transcription of human immunodeficiency virus type 1 (HIV-1) is primed by tRNA(Lys3), which forms an 18 base pair RNA homoduplex with its 3' terminus and the primer binding site (PBS) of the viral genome. Using an in vitro system mimicking initiation of minus strand DNA synthesis, we analyzed the mechanism by which HIV-1 reverse transcriptase (RT)-associated ribonuclease H (RNase H) distinguishes between RNA/DNA and RNA/RNA (dsRNA). tRNA(Lys3) was hybridized to a PBS-containing RNA template and extended by addition of deoxynucleoside triphosphates (dNTPs). In the presence of all four dNTPs, initial cleavage of the RNA template occurred immediately downstream of the tRNA-DNA junction, reflecting RNase H specificity for RNA in a RNA/DNA hybrid. However, in the absence of DNA synthesis, or limiting this by chain termination, the PBS was cleaved at a constant distance of 18 nucleotides upstream of the nascent primer 3' terminus. The position of cleavage remained in register with the position of DNA synthesis arrest, indicating that hydrolysis of homoduplex RNA is spatialy co-ordinated with DNA synthesis. Kinetic studies comparing cleavage rates of an analogous DNA primer/PBS heteroduplex and the tRNA(Lys3)/PBS homoduplex showed that while the former is cleaved as rapidly as RT polymerizes, the latter proceeds 30-fold slower. Although the RNase H domain hydrolyzes dsRNA when RT is artificially arrested, specificity for RNA/DNA hybrids is maintained when DNA is actively synthesized, since residency of the RNase H domain at a single base position is not long enough to allow significant cleavage on dsRNA.