APOBEC3G (A3G), a host protein that inhibits HIV-1 reverse transcription and replication in the absence of Vif, displays cytidine deaminase and single-stranded (ss) nucleic acid binding activities. HIV-1 nucleocapsid protein (NC) also binds nucleic acids and has a unique property, nucleic acid chaperone activity, which is crucial for efficient reverse transcription. Here we report the interplay between A3G, NC and reverse transcriptase (RT) and the effect of highly purified A3G on individual reactions that occur during reverse transcription. We find that A3G did not affect the kinetics of NC-mediated annealing reactions, nor did it inhibit RNase H cleavage. In sharp contrast, A3G significantly inhibited all RT-catalyzed DNA elongation reactions with or without NC. In the case of (-) strong-stop DNA synthesis, the inhibition was independent of A3G's catalytic activity. Fluorescence anisotropy and single molecule DNA stretching analyses indicated that NC has a higher nucleic acid binding affinity than A3G, but more importantly, displays faster association/disassociation kinetics. RT binds to ssDNA with a much lower affinity than either NC or A3G. These data support a novel mechanism for deaminase-independent inhibition of reverse transcription that is determined by critical differences in the nucleic acid binding properties of A3G, NC and RT.