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, lambda3, determined at 2.5 A 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 lambda3 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.