Mutations in PMR1, a yeast gene encoding a calcium/manganese exporter, dramatically decrease Ty1 retrotransposition. Ty1 cDNA is reduced in pmr1 mutant cells, despite normal levels of Ty1 RNA and proteins. The transposition defect results from Mn(2+) accumulation that inhibits reverse transcription. Cytoplasmic accumulation of Mn(2+) in pmr1 cells may directly affect reverse transcriptase (RT) activity. Trace amounts of Mn(2+) potently inhibit Ty1 RT and HIV-1 RT in vitro when the preferred cation, Mg(2+), is present. Both Mn(2+) and Mg(2+) alone activate Ty1 RT cooperatively with Hill coefficients of 2, providing kinetic evidence for a dual divalent cation requirement at the RT active site. We propose that occupancy of the B site is the major determinant of catalytic activity and that Mn(2+) at this site greatly reduces catalytic activity.