DNA polymerase epsilon (pol epsilon) was purified to apparent homogeneity from human placentas. The purified enzyme contains a single polypeptide of approximately 170 kDa (apparent mass) and has both DNA polymerase and 3'-5'-exonuclease activities. Competitive inhibition studies indicate that like DNA polymerases alpha and delta (pol alpha and pol delta, respectively), free pol epsilon binds single-stranded but not double-stranded DNA. This conclusion was confirmed by sedimentation binding analysis. Also like pol alpha and pol beta, pol epsilon exhibits induced dNTP inhibition in the presence of template annealed to complementary primer containing a 2',3'-H (dideoxy)-terminus. Together, these data suggest that pol epsilon follows an ordered sequential ter-reactant mechanism of substrate recognition and binding; it binds template first followed by annealed primer and then template-specified dNTP. Enzymologic studies suggest that in contrast to both pol alpha and pol delta, pol epsilon functions more efficiently as gap size decreases. This observation is consistent with a specific role for pol epsilon in gap-filling in vivo. Gap-filling is essential for both replication and repair.