Polymerase θ is a robust terminal transferase that oscillates between three different mechanisms during end-joining

DNA polymerase theta (Pol theta) promotes insertion mutations during alternative end-joining (alt-EJ) by an unknown mechanism. Here, we discover that mammalian Polio transfers nucleotides to the 3' terminus of DNA during alt-EJ in vitro and in vivo by oscillating between three different modes of terminal transferase activity: non-templated extension, templated extension in cis, and templated extension in trans. This switching mechanism requires manganese as a co-factor for Pol theta template-independent activity and allows for random combinations of templated and nontemplated nucleotide insertions. We further find that Pol theta terminal transferase activity is most efficient on DNA containing 3' overhangs, is facilitated by an insertion loop and conserved residues that hold the 3' primer terminus, and is surprisingly more proficient than terminal deoxynucleotidyl transferase. In summary, this report identifies an unprecedented switching mechanism used by Polio to generate genetic diversity during alt-EJ and characterizes Pol theta as among the most proficient terminal transferases known.