A series of test substrates have been synthesized to establish the effect of termini on the putative exoribonuclease H activity of reverse transcriptase. Recombinant reverse transcriptase from human immunodeficiency virus, natural enzyme from avian myeloblastosis virus, and a known endonuclease, Escherichia coli ribonuclease H, cleaved relaxed, circular, covalently closed plasmids in which 770 consecutive residues of one strand were ribonucleotides. The avian enzyme also deadenylated capped globin mRNA with a covalently attached oligo(dT) tail at the 3' end. These results resolve a long-standing controversy--that the viral enzymes are obligatory exonucleases in vitro, based on their failure to cleave certain substrates for E. coli ribonuclease H, including circular poly(A).linear poly(T) and ribonucleotide-substituted supercoiled plasmids, but resemble endonucleases in vivo, based on their ability to degrade RNA in complex DNA.RNA hybrids. The data strongly suggest that the viral enzymes are endonucleases with exquisite sensitivity to the conformation of heteroduplexes. Inhibition of viral, but not cellular, ribonuclease H with ribonucleoside-vanadyl complexes further distinguishes these enzymes.