The human immunodeficiency virus type 1 (HIV-1) particle contains two identical RNA strands, each corresponding to the entire genome. The 5' untranslated region (UTR) of each RNA strand contains extensive secondary and tertiary structures that are instrumental in different steps of the viral replication cycle. We have characterized the 5' UTRs of nine different HIV-1 isolates representing subtypes A through G and, by comparing their homodimerization and heterodimerization potentials, found that complementarity between the palindromic sequences in the dimerization initiation site (DIS) hairpins is necessary and sufficient for in vitro dimerization of two subtype RNAs. The 5' UTR sequences were used to design donor and acceptor templates for a coupled in vitro dimerization-reverse transcription assay. We showed that template switching during reverse transcription is increased with a matching DIS palindrome and further stimulated proportional to the level of homology between the templates. The presence of the HIV-1 nucleocapsid protein NCp7 increased the template-switching efficiency for matching DIS palindromes twofold, whereas the recombination efficiency was increased sevenfold with a nonmatching palindrome. Since NCp7 did not effect the dimerization of nonmatching palindromes, we concluded that the protein most likely stimulates the strand transfer reaction. An analysis of the distribution of template-switching events revealed that it occurs throughout the 5' UTR. Together, these results demonstrate that the template switching of HIV-1 reverse transcriptase occurs frequently in vitro and that this process is facilitated mainly by template proximity and the level of homology.