Assembly of infectious retroviral particles involves recognition of specific sequences on the viral RNA by the nucleocapsid (NC) domain of the Gag polyprotein, and subsequent stoichiometric binding of the processed NC protein along the entire length of the RNA. NC proteins also act as nucleic acid chaperones. They accelerate nucleic acid hybridization and strand exchange, which may be critical during the initial stages of reverse transcription. In order to better understand these properties, we have studied the nucleic acid helix-destabilizing t(m)-depressing) and binding activities of HIV-1 NCp7 protein with a variety of substrates, and the real-time kinetics of NC-induced strand exchange. At low ionic strength (0.01 M Na phosphate, pH 7.0) and saturating levels of protein, NCp7 displays moderate helix-destabilizing activity on double-stranded DNA. Saturating levels of NCp7 lowered the t(m) of a synthetic 28 base-pair 28(+)/28(-) oligonucleotide duplex by about 10 deg. C (51 to 41 degrees C). The presence of single-stranded calf thymus DNA (equimolar with duplex) eliminated the t(m) depression, whereas double-stranded calf thymus DNA only altered the t(m) of the 28-mer duplex by about 2 deg. C. Similar effects were seen with duplexes with single-stranded overhangs or internal single-stranded gaps. Binding experiments utilizing intrinsic tryptophan quenching indicated significant affinity (K(d) about 0.1 microM) for both single-stranded and double-stranded forms of the 28-mer in 0.01 M sodium phosphate at 25 degrees C, although long-chain (calf thymus double-stranded) DNA displayed a much lower affinity. The effects of NCp7 on the kinetics of nucleic acid annealing, strand exchange, and strand displacement were determined by use of oligonucleotides with end-labeled fluorophores serving as donor-acceptor pairs. NCp7 accelerated all these reactions. In the strand exchange reaction, an imperfect duplex, 28(+)/21(-), was reacted with a perfect complement, 28(-). The kinetics of 28(+)/28(-) annealing in this reaction did not conform to a simple bimolecular model, but could be well fit to the sum of two exponential decays. Addition of stoichiometric levels of NCp7 increased the rate constants of both components, and significantly increased the fraction of exchange associated with the rapid process. Increasing levels of 28(-) also increased the rapid fraction, as well as the rapid rate constant. This concentration dependence indicates that, although the kinetic decays appear biexponential, at least one of the steps is bimolecular. Simple annealing reactions, 28(+) with 28(-), could be fit to single-exponential decays, and their magnitudes in the presence of NCp7 were comparable to the rapid step of annealing observed for exchange reactions, suggesting that this step is connected with annealing. Strand dissociation during exchange was monitored by placing the fluorescent acceptor on the 21(-) strand. The results, though complex, suggest that the slow step of exchange is largely associated with the dissociation of the shorter oligonucleotide. Analogous experiments were performed with variants of these oligonucleotides, and the results are in line with the 28(+)/21(-)/28(-) experiments. On the basis of an analysis of the effect of increasing levels of 28(-) on the formation of the perfect 28 bp duplex from the imperfect duplex, we propose that NCp7 forms a ternary complex intermediate with imperfect duplex and 28(-), and suggest several ways by which such an intermediate would facilitate strand exchange.