The reovirus polymerase and those of other dsRNA viruses function within the confines of a protein capsid to transcribe the tightly packed dsRNA genome segments. The crystal structure of the reovirus polymerase, λ3, determined at 2.5 Å resolution, shows a fingers-palm-thumb core, similar to those of other viral polymerases, surrounded by major N- and C-terminal elaborations, which create a cage-like structure, with four channels leading to the catalytic site. This “caged” polymerase has allowed us to visualize the results of several rounds of RNA polymerization directly in the crystals. A 5′ cap binding site on the surface of λ3 suggests a template retention mechanism by which attachment of the 5′ end of the plus-sense strand facilitates insertion of the 3′ end of the minus-sense strand into the template channel.