We have analyzed the functional significance of the phi29 DNA polymerase "YxGG/A" motif in initiation and replication reactions involving the terminal protein (TP) as a primer. This motif, located between the proposed limits of the polymerase and exonuclease domains, has been shown to be very important for the coordination between synthesis and degradation in phi29 DNA polymerase. Mutations in this region affected the polymerization/exonucleolysis (pol/exo) balance, due to its importance for DNA template binding stability at both active sites. Here, we show that the YxGG/A motif of phi29 DNA polymerase is necessary for the formation of a stable complex between TP and phi29 DNA polymerase, affecting initiation and transition during replication of phi29 TP-DNA. The phenotypes in TP-primed reactions in nine of 11 mutant polymerases, showed reduced initiation and/or replication activities using TP-DNA as template. High dATP concentrations allowed the reduced initiation activities of some of these mutant polymerases to reach the wild-type level. The reduction in their affinity for the initiating nucleotide is likely due to their reduced interaction with the TP. Besides, the YxGG/A motif of phi29 DNA polymerase controls the pol/exo balance in the transition step immediately after TP-primed initiation, before DNA polymerase and TP dissociate. Thus, from the first elongation step, the phenotypes of the mutant polymerases parallel those obtained in DNA-primed replication: wild-type, high and low pol/exo balance. A detailed analysis of different transition intermediates suggests that mutants at the YxGG/A motif switch from interaction with TP to DNA once the TP has been extended with six nucleotides.