msDNA-Ec67 is produced in a clinical strain of Escherichia coli and composed of a 67-base single-stranded DNA, which is linked to the 2'-OH group of the 15th rG residue of a 58-base RNA molecule by a 2',5'-phosphodiester linkage (Lampson, B. C., Sun, J., Hsu, M.-Y., Vallejo-Ramirez, J., Inouye, S., and Inouye, M. (1989) Science 243, 1033-1038). The production of msDNA-Ec67 is dependent upon retron-Ec67, which consists of the msr-msd region and the gene for reverse transcriptase (RT). These two elements were separately cloned into plasmids; p67-BHO.6 contained the msr-msd region and pRT-67 contained the RT gene under the lpp-lac promoter-operator. msDNA-Ec67 was produced only when cells were transformed with both plasmids. In addition, msDNA-Ec67 was synthesized in a cell-free system using total RNA prepared from cells harboring plasmid p67-BHO.6 and purified Ec67-RT. Using this cell-free system, the priming reaction, during initiation of DNA synthesis, was demonstrated to be a specific template-directed event; only dTTP was incorporated into a 132-base precursor RNA yielding a 133-base compound. This specific dT addition could be altered to dA or dC by simply substituting the 118th A residue of the putative msr-msd transcript with a T or G residue. The priming reaction was blocked when A was substituted for G at the 15th residue of the precursor RNA transcript, which corresponds to the branched rG residue in msDNA. DNA chain elongation could be terminated by adding ddNTP in the cell-free system, forming a sequence ladder. The DNA sequence determined from this ladder completely agreed with the msDNA sequence. The RT extension reaction was completely blocked when the RNA preparation was treated with RNase A but not when the preparation was treated with DNase. This clearly demonstrates that RNA but not DNA is responsible for the msDNA production. A part of the fully extended cell-free product contained a 13-base RNA strand resistant to RNase A, which is consistent with the previously proposed model. In this model, the 5'-end sequence of the msr-msd transcript (a2; bases 1-13) forms a duplex with the 3'-end sequence (a1) of the same transcript, thus serving as a primer, as well as a template for msDNA synthesis by RT. Our results are inconsistent with a model recently proposed by Lease and Yee (Lease, R. A., and Yee, T. (1991) J. Biol. Chem. 266, 14497-14503).