DNA polymerase θ (Pol θ) is a proofreading-deficient family A polymerase involved in translesion synthesis and DNA repair. The error rate of the polymerase is 10~100 times higher compared to other family A members. Previous smFRET studies on Klenow fragment (KF), a high fidelity A-family polymerase, revealed three finger domain conformations: open, ajar, and closed. The polymerase is in a mixed conformational state and the closed conformation dominates upon binding to a cognate nucleotide. An ajar conformation that examines the incoming nucleotide for complementarity is predominant in the presence of a noncognate nucleotide. Our smFRET and in vitro replication assay results suggest that two Pol θ proteins bound the DNA substrate with short homology region in a cooperative manner, possibly forming a transient dimer. smFRET measurements on DNA templates with Pol θ revealed dynamics between discrete conformational states of the complex. The closed conformation of Pol θ was markedly stabilized by the cognate nucleotide, but it also persisted in the presence of non-cognate nucleotide, suggesting the mechanical origin of its low fidelity in nucleotide selection. Our results suggest the intricate interplay of the conformational dynamics and dimer formation of Pol θ as the molecular basis for the recognition of short DNA homology and the replication with low fidelity.