Template switching during reverse transcription promotes recombination in retroviruses. Efficient switches have been measured in vitro on hairpin-containing RNA templates by a two-step mechanism. Pausing of the reverse transcriptase (RT) at the hairpin base allowed enhanced cleavage of the initial donor RNA template, exposing regions of the cDNA and allowing the acceptor to base pair with the cDNA. This defines the first or docking step. The primer continued synthesis on the donor, transferring or locking in a second step. Here we determine the enzyme-dependent factors that influence template switching by comparing the RTs from human immunodeficiency virus, type 1 (HIV-1), and equine infectious anemia virus (EIAV). HIV-1 RT promoted transfers with higher efficiency than EIAV RT. We found that both RTs paused strongly at the base of the hairpin. While stalled, HIV-1 RT made closely spaced cuts, whereas EIAV RT made only a single cut. Docking occurred efficiently at the multiply cut but not at the singly cut site. HIV-1 nucleocapsid (NC) protein stimulated strand transfers. It improved RNase H activity of both RTs. It allowed the EIAV RT to make a distribution of cuts, greatly stimulating docking at the base of the hairpin. Most likely, it also promoted strand exchange, allowing transfers to be initiated from sites throughout the hairpin. Minor pause sites beyond the base of the hairpin correlated with the locking sites. The strand exchange properties of NC likely promote this step. We present a model that explains the roles of RNase H specificity, template structure, and properties of NC in the two-step transfer reaction.