Alterations in the exonuclease domain of DNA polymerase ε (Polε) cause ultramutated tumors. Severe mutator effects of the most common variant, Polε-P286R, modeled in yeast suggested that its pathogenicity involves yet unknown mechanisms beyond simple proofreading deficiency. We show that, despite producing a catastrophic amount of replication errors in vivo, the yeast Polε-P286R analog retains partial exonuclease activity and is more accurate than exonuclease-dead Polε. The major consequence of the arginine substitution is a dramatically increased DNA polymerase activity. This is manifested as a superior ability to copy synthetic and natural templates, extend mismatched primer termini, and bypass secondary DNA structures. We discuss a model wherein the cancer-associated substitution limits access of the 3’-terminus to the exonuclease site and promotes binding at the polymerase site, thus stimulating polymerization. We propose that the ultramutator effect results from increased polymerase activity amplifying the contribution of Polε errors to the genomic mutation rate.