In vitro studies have indicated that retroviral nucleocapsid (NC) protein facilitates both DNA synthesis by reverse transcriptase (RT) and annealing of the nascent DNA with acceptor template. Increasing the rate of DNA synthesis is expected to reduce the frequency of RT template switching, whereas annealing the nascent DNA with acceptor template promotes template switching. We performed a mutational analysis of the murine leukemia virus (MLV) NC zinc finger domain to study its effect on RT template switching in vivo and to explore the role of NC during reverse transcription. The effects of NC mutations on RT template switching were determined by using a previously described in vivo direct-repeat deletion assay. A trans-complementation assay was also developed in which replication-defective NC mutants were rescued by coexpression of replication-defective RT mutants that provided wild-type NC in trans. We found that mutations in the MLV NC zinc finger domain increased the frequency of template switching approximately twofold. When a predicted stem-loop RNA secondary structure was introduced into the template RNA, the template-switching frequency increased 5-fold for wild-type NC and further increased up to an additional 6-fold for NC zinc finger domain mutants, resulting in an overall increase of as much as 30-fold. Thus, wild-type NC increased the efficiency with which RT was able to reverse transcribe through regions of RNA secondary structure that might serve as RT pause sites. These results provide the first in vivo evidence that NC enhances the rate of DNA synthesis by RT in regions of the template possessing stable RNA secondary structure.