The mechanism of HIV reverse transcriptase (RT) catalyzed strand transfer synthesis (i.e., switching of the primer to a new template) from internal regions on RNA templates in the presence and absence of HIV nucleocapsid protein (NCp) was investigated. Two different systems each consisting of DNA-primed RNA donor (on which primer extension initiated) and acceptor (to which DNAs initiated on the donor could transfer) templates were used to determine kinetic parameters of strand transfer. The donor and acceptor shared an internal region of homology where homologous strand transfer could occur. The rate of strand transfer at various acceptor concentrations was determined by monitoring the production of transfer products over time. These rates were used to construct Lineweaver-Burk plots. In each system, NCp increased the Vmax about 3-fold while the Km for acceptor template was decreased severalfold. NCp's effects on RT extension ranged from no effect to inhibition depending on the primer-template used. The lowered Km shows that NCp increases the affinity of the acceptor template for the transferring DNA. Vmax increases despite the inhibition of RT extension. The increased Vmax implies a stimulatory mechanism that cannot be mimicked by high acceptor concentrations. Therefore, NCp does not act by merely increasing the effective concentration of nucleic acids.