Porcine liver DNA polymerase .gamma. contains exonuclease activity capable of digesting DNA in the 3''.fwdarw.5'' direction, releasing deoxyribonucleoside 5''-monophosphates. The exonuclease activity excises 3''-terminal bases from both matched and mismatched primer termini, with a preference for mismatched bases. Under polymerization conditions, mismatch excision by the exonuclease occurs prior to polymerization by polymerase .gamma., and this excision can be inhibited by additing to the reaction a high concentration of dNTP substrates and/or nucleoside 5''-monophosphates. In an M13mp2-based reversion assay for detecting single-base substitution errors, porcine liver polymerase .gamma. is highly accurate; the estimated base substitution error rate is less than one error for each 500000 bases polymerized. Lower fidelity is observed using reaction conditions that inhibit the exonuclease activity, strongly suggesting that the exonuclease proofreads errors during polymerization. However, in a forward mutation assay capable of detecting all 12 mispairs at a variety of template positions, certain base substitution errors are readily detected even using unperturbed polymerization conditions. Thus, for some errors, polymerase .gamma. is not highly accurate, suggesting that proofreading is not equally active against all mispairs. To examine if the polymerase and exonuclease activities are physically as well as functionally associated, both activities were monitored during purification by four procedures, each based on a different separation principle. The two activities copurify during chromatography using phosphocellulose, heparin-agarose, or dobule-strand DNA-cellulose, and during velocity sedimentation in a glycerol gradient containing 0.5 M KCl. These results suggest that the polymerase and exonuclease activities are physically associated. It remains to be determined if they reside in the same subunit.