A key step in the life cycle of many viruses, including bacteriophages, adenoviruses, and herpesviruses, is the packaging of replicated viral genomes into pre-assembled proheads by the action of ATP-dependent portal motor complexes. Here we present a method that allows the initiation of packaging by single complexes to be studied using optical tweezers. A procedure is developed for assembling phage Φ29 prohead-motor complexes, which are demonstrated to bind and begin translocation of a target DNA molecule within only a few seconds. We show that the Φ29 DNA terminal protein (gene product 3), which functions to prime DNA replication, also has a dramatic effect on packaging. The DNA tether length measured immediately after binding varied from ~30-100% of the full length, yet shortened monotonically, indicating that packaging does not strictly begin at the terminal end of the DNA. Removal of the terminal protein eliminated this variability, causing packaging to initiate at or very near the end of the DNA. These findings, taken together with electron microscopy data, suggest that rather than simply threading into the portal, the motor captures and dynamically tensions a DNA loop, and that the function of the terminal protein is to load DNA segments on both sides of the loop junction onto separate DNA translocating units.