Three Escherichia coli heat shock proteins, DnaJ, DnaK, and GrpE, are required for replication of the bacteriophage lambda chromosome in vivo. We show that the GrpE heat shock protein is not required for initiation of lambda DNA replication in vitro when the concentration of DnaK is sufficiently high. GrpE does, however, greatly potentiate the action of DnaK in the initiation process when the DnaK concentration is reduced to a subsaturating level. We demonstrate in the accompanying articles (Alfano, C. and McMacken, R. (1989) J. Biol. Chem. 264, 10699-10708; Dodson, M., McMacken, R., and Echols, H. (1989) J. Biol. Chem. 264, 10719-10725) that DnaJ and DnaK bind to prepriming nucleoprotein structures that are assembled at the lambda replication origin (ori lambda). Binding of DnaJ and DnaK completes the ordered assembly of an ori lambda initiation complex that also contains the lambda O and P initiators and the E. coli DnaB helicase. With the addition of ATP, the DnaJ and DnaK heat shock proteins mediate the partial disassembly of the initiation complex, and the P and DnaJ proteins are largely removed from the template. Concomitantly, on supercoiled ori lambda plasmid templates, the intrinsic helicase activity of DnaB is activated and DnaB initiates localized unwinding of the DNA duplex, thereby preparing the template for priming and DNA chain elongation. We infer from our results that DnaK and DnaJ function in normal E. coli metabolism to promote ATP-dependent protein unfolding and disassembly reactions. We also provide evidence that neither the lambda O and P initiators nor the E. coli DnaJ and DnaK heat shock proteins play a direct role in the propagation of lambda replication forks in vitro.