The chain-terminator method (sometimes referred to as the Sanger method), is more efficient and uses fewer toxic chemicals and lower amounts of radioactivity than the method of Maxam and Gilbert. It is generally the method of choice for DNA sequencing. The key principle of the Sanger method was the use of dideoxynucleotides triphosphates (ddNTPs) as DNA chain terminators.

The classical chain-termination method requires a single-stranded DNA template, a DNA primer, a DNA polymerase, radioactively or fluorescently labeled nucleotides, and modified nucleotides that terminate DNA strand elongation. The DNA sample is divided into four separate sequencing reactions, containing all four of the standard deoxynucleotides (dATP, dGTP, dCTP and dTTP) and the DNA polymerase. To each reaction is added only one of the four dideoxynucleotides (ddATP, ddGTP, ddCTP, or ddTTP) which are the chain-terminating nucleotides, lacking a 3'-OH group required for the formation of a phosphodiester bond between two nucleotides, thus terminating DNA strand extension and resulting in various DNA fragments of varying length.

The newly synthesized and labeled DNA fragments are heat denatured, and separated by size (with a resolution of just one nucleotide) by gel electrophoresis on a denaturing polyacrylamide-urea gel with each of the four reactions run in one of four individual lanes (lanes A, T, G, C); the DNA bands are then visualized by autoradiography or UV light, and the DNA sequence can be directly read off the X-ray film or gel image. In the image on the right, X-ray film was exposed to the gel, and the dark bands correspond to DNA fragments of different lengths. A dark band in a lane indicates a DNA fragment that is the result of chain termination after incorporation of a dideoxynucleotide (ddATP, ddGTP, ddCTP, or ddTTP). The relative positions of the different bands among the four lanes are then used to read (from bottom to top) the DNA sequence.

Technical variations of chain-termination sequencing include tagging with nucleotides containing radioactive phosphorus for radiolabelling, or using a primer labeled at the 5’ end with a fluorescent dye. Dye-primer sequencing facilitates reading in an optical system for faster and more economical analysis and automation. The later development by L Hood and coworkers of fluorescently labeled ddNTPs and primers set the stage for automated, high-throughput DNA sequencing.

Chain-termination methods have greatly simplified DNA sequencing. For example, the chain-termination-based "Sequenase" kit from USB Biochemicals contains most of the reagents needed for sequencing, pre-aliquoted and ready to use. Limitations include non-specific binding of the primer to the DNA, affecting accurate read-out of the DNA sequence, and DNA secondary structures affecting the fidelity of the sequence.

Dye-terminator sequencing utilizes labelling of the chain terminator ddNTPs, which permits sequencing in a single reaction, rather than four reactions as in the labelled-primer method. In dye-terminator sequencing, each of the four dideoxynucleotide chain terminators is labelled with fluorescent dyes, each of which with different wavelengths of fluorescence and emission. Owing to its greater expediency and speed, dye-terminator sequencing is now the mainstay in automated sequencing. Its limitations include dye effects due to differences in the incorporation of the dye-labelled chain terminators into the DNA fragment, resulting in unequal peak heights and shapes in the electronic DNA sequence trace chromatogram after capillary electrophoresis (see figure to the right). This problem has been addressed with the use of modified DNA polymerase enzyme systems and dyes that minimize incorporation variability, as well as methods for eliminating "dye blobs". The dye-terminator sequencing method, along with automated high-throughput DNA sequence analyzers, is now being used for the vast majority of sequencing projects.