Tyr183 is a constituent of the highly conserved YXDD motif common to all retroviral reverse transcriptases. The two aspartates in this motif are the crucial members of the catalytic carboxylate triad while residue X, which in the case of HIV-1 RT is Met184, is implicated in dNTP substrate recognition and fidelity of DNA synthesis. In an attempt to understand the function of Tyr183 in the catalytic mechanism, we generated mutants of this residue (Y183F and Y183A) and subjected them to in-depth analysis. The efficiency of reverse transcription of natural U5-PBS HIV-1 RNA template was severely impaired by both the conservative and nonconservative substitutions. The major defect identified was at the level of dNTP binding as determined by a 20-80-fold increase in the Km for the dNTP substrate on both homopolymeric and heteropolymeric RNA and DNA templates. A significant reduction in processivity of DNA synthesis by these mutants was also noted. However, the fidelity of DNA synthesis by the Y183F and Y183A mutants was increased significantly compared to the wild-type enzyme. Interestingly, the reduction in the polymerase activity due to single substitution of Tyr to Phe in the YMDD motif is compensated by a second substitution of Met to Val in the same motif, herein referred to as the FVDD. The loss of dNTP binding as well as decreased processivity of DNA synthesis exhibited by the Y183F mutant was also compensated by mutation at the second site. Curiously, the double mutant did not exhibit any synergistic effect in regard to fidelity of DNA synthesis as might be expected since both the single mutations (Y183F, M184V) exhibited enhanced fidelity compared to the wild-type enzyme. These data implicate Tyr183 and Met184 as important constituents of the dNTP-binding pocket. We propose a model which suggests that subtle structural changes due to mutation in the flexible beta9-beta10 loop region at the active site of the molecule influence the enzyme activity and substrate recognition.