By using a baculovirus expression system, the adenovirus (Ad) DNA polymerase was purified to homogeneity and shown to display a 3'-->5'exonuclease activity which is coupled to the polymerase activity. On a partial duplex structure the exonuclease activity had a marked preference for excision of a mismatched versus a matched 3'-terminus, which enables the Ad DNA polymerase to act as a proofreading enzyme. On single-stranded DNA the exonuclease action is distributive, but during replication removal of mismatched nucleotides and the switch to synthesis occurs without dissociation of the polymerase from the template. When the Ad DNA polymerase is bound to the precursor terminal protein, the rate of exonucleolysis was four times slower. Moreover, degradation could not proceed as far as with the free Ad polymerase, indicating also a qualitative difference. These results suggest a reduced proofreading capacity of the precursor terminal protein-polymerase complex, which might affect the initial stages of DNA replication.