Exonuclease III is the major apurinic/apyrimidinic (AP) endonuclease of Escherichia coli, accounting for more than 80% of the total cellular AP endonuclease activity. We have shown earlier that the endonucleolytic activity of exonuclease III is able to hydrolyze the phosphodiester bond 5' to the urea N-glycoside in a duplex DNA [Kow, Y. W., & Wallace, S. S. (1985) Proc. Natl. Acad. Sci. U.S.A. 82, 8354-8358]. Therefore, we were interested in studying the mechanism of action of the endonucleolytic activity of exonuclease III by preparing DNA containing different base lesions as well as chemically modified AP sites. When AP sites were converted to O-alkylhydroxylamine residues, exonuclease III was able to hydrolyze the phosphodiester bond 5' to O-alkylhydroxylamine residues. The apparent Km for different O-alkylhydroxylamine residues was not affected by the particular O-alkylhydroxylamine residue substituted; however, the apparent Vmax decreased as the size of the residue increased. On the basis of a study of the substrate specificity of exonuclease III, a modification of the Weiss model for the mechanism of action of exonuclease III is presented. Furthermore, a temperature study of exonucleolytic activity of exonuclease III in the presence of Mg2+ showed discontinuity in the Arrhenius plot. However, no discontinuity was observed when the reaction was performed in the presence of Ca2+. Similarly, no discontinuity was observed for the endonucleolytic activity of exonuclease III, in the presence of either Ca2+ or Mg2+. These data suggest that, in the presence of Mg2+, exonuclease III, in the presence of either Ca2+ or Mg2+.(ABSTRACT TRUNCATED AT 250 WORDS)