We recently reported that zidovudine (AZT) selected for the Q509L mutation in the ribonuclease H (RNase H) domain of HIV-1 reverse transcriptase (RT), which increases resistance to AZT in combination with the thymidine analogue mutations D67N, K70R, and T215F. In the current study, we have defined the mechanism by which Q509L confers AZT resistance by performing in-depth biochemical analyses of wild type, D67N/K70R/T215F and D67N/K70R/T215F/Q509L HIV-1 RT. Our results show that Q509L increases AZT-monophosphate (AZT-MP) excision activity of RT on RNA/DNA template/primers (T/Ps) but not DNA/DNA T/Ps. This increase in excision activity on the RNA/DNA T/P is due to Q509L decreasing a secondary RNase H cleavage event that reduces the RNA/DNA duplex length to 10 nucleotides and significantly impairs the enzyme's ability to excise the chain-terminating nucleotide. Presteady-state kinetic analyses indicate that Q509L does not affect initial rates of the polymerase-directed RNase H activity but only polymerase-independent cleavages that occur after a T/P dissociation event. Furthermore, competition binding assays suggest that Q509L decreases the affinity of the enzyme to bind T/P with duplex lengths less than 18 nucleotides in the polymerase-independent RNase H cleavage mode, while not affecting the enzyme's affinity to bind the same T/P in an AZT-MP excision competent mode. Taken together, this study provides the first mechanistic insights into how a mutation in the RNase H domain of RT increases AZT resistance and highlights how the polymerase and RNase H domains of RT function in concert to confer drug resistance.