The primase fragment of bacteriophage T7 gene 4 protein catalyzes the synthesis of oligoribonucleotides in the presence of ATP, CTP, Mg2+ (or Mn2+), and DNA containing a primase recognition site. During chain initiation, ATP binds with a K-m of 0.32 mM, and CTP binds with a K-m of 0.85 mM. Synthesis of the dinucleotides proceeds at a rate of 3.8/s. The dinucleotide either dissociates or is extended to a tetranucleotide. The primase preferentially inserts ribonucleotides forming Watson-Crick base pairs with the DNA template >200-fold more rapidly than other ribo- or deoxynucleotides. 3'-dCTP binds the primase with a similar affinity as CTP and is incorporated as a chain terminator at a rate 1/100 that of CTP. ATP analogues alpha,beta-methylene ATP, beta,gamma-methylene ATP, and beta,gamma-imido ATP are incorporated by the primase fragment at the 5'-ends of the oligoribonucleotides but not at the 3'-ends. A model is presented in which the primase fragment utilizes two nucleotide-binding sites, one for the initiating ATP and one for the nucleoside triphosphate which elongates the primer on the 3'-end, The initiation site binds ATP or oligoribonucleotides, whereas the elongation site binds ATP or CTP as directed by the template.