Preterminal protein (pTP), the protein primer for adenovirus DNA replication, is processed at two sites by the virus-encoded protease to yield mature terminal protein (TP). Here we demonstrate that processing to TP, via an intermediate (iTP), is conserved in all serotypes sequenced to date; and in determining the sites cleaved in Ad4 pTP, we extend the previously published substrate specificity of human adenovirus proteases to include a glutamine residue at P4. Furthermore, using monoclonal antibodies raised against pTP, we show that processing to iTP and TP are temporally separated in the infectious cycle, with processing to iTP taking place outside the virus particles. In vitro and in vivo studies of viral DNA replication reveal that iTP can act as a template for initiation and elongation and argue against a role for virus-encoded protease in switching off DNA replication. Virus DNA with TP attached to its 5 end (TP-DNA) has been studied extensively in in vitro DNA replication assays. Given that in vivo pTP-DNA, not TP-DNA, is the template for all but the first round of replication, the two templates were compared in vitro and shown to have different properties. Immunofluorescence studies suggest that a region spanning the TP cleavage site is involved in defining the subnuclear localization of pTP. Therefore, a likely role for the processing of pTP-DNA is to create a distinct template for early transcription (TP-DNA), while the terminal protein moiety, be it TP or pTP, serves to guide the template to the appropriate subcellular location through the course of infection.Adenovirus DNA replicates by a protein-priming mechanism in which the virus-encoded preterminal protein (pTP) and adenovirus DNA polymerase (Adpol) form a stable heterodimer and pTP serves as the protein primer (20,35,37,39). DNA replication is initiated by the covalent attachment of dCMP to pTP, following the binding of pTP-Adpol to the core origin of replication (20,35,42). Initiation is enhanced by two cellular factors, nuclear factor I (NFI or CTF1) and nuclear factor III (NFIII or Oct1), and by the virus-encoded, singlestranded DNA binding protein (3,5,6,8,10,12,25,26,31,40). In addition to the incoming pTP, the presence of terminal protein (TP), covalently attached to the 5Ј end of the DNA, stimulates initiation in in vitro DNA replication assays, a phenomenon due in part to an increased affinity of the incoming pTP-Adpol for TP-linked DNA (29,30). Initiation of DNA replication is followed by dissociation of NFI from the complex (9), elongation of the daughter strand by Adpol, and strand displacement. The nature of the molecular rearrangements at the origin of replication preceding elongation and the functional contributions of each of the protein components remain to be established. In particular, questions that elude us are whether pTP and Adpol remain associated throughout elongation, and the nature, if any, of the roles of the pTP moieties attached to the displaced and daughter strands (20,43).