A transcript (RNA II) of plasmid ColE1 that hybridizes with the template DNA is cleaved by RNAase H and used as a primer by DNA polymerase I. However, the plasmid can replicate in bacteria lacking both enzymes, apparently using a different mechanism of initiation of replication. Here we report in vivo and in vitro studies on initiation of DNA replication in the presence or absence of either or both enzymes. Hybridization of RNA II with the template DNA is always required for initiation. Hybridized RNA II is cleaved by RNAase H to form a primer or used as a primer without cleavage by RNAase H. Hybridization also creates a single-stranded region on the nontranscribed strand that can serve as a template for synthesis of the lagging strand in a reaction that does not require DNA polymerase I. Lagging strand synthesis terminates 17 nucleotides upstream of the normal replication origin, forcing unidirectional replication.