The protein components required for generation of cohesive ends in vitro from circular bacteriophage P2 DNA have been purified to near homogeneity. In the presence of ATP, the purified products of P2 genes M and P together with empty phage capsids (comprised primarily of the N protein) mediate site-specific cleavage of circular P2 DNA at the cohesive end site (cos). This terminase or ter system also utilizes circular DNAs of bacteriophages P4 and 186, introducing site-specific scissions at cos sites within these molecules. The ter reaction exhibits a peculiar requirement for a circular DNA substrate. Substrate activity is greatly reduced when circular P2, P4, or 186 DNAs are linearized by restriction endonuclease hydrolysis. Furthermore, multimeric P4 DNA molecule sites are also essentially inactive in the linear form but are active in the circular state. The dependence of ter action on a circular substrate is not due to inhibition of the system by linear DNA, nor does it appear to reflect a requirement for substrate superhelicity since circular P4 DNA containing single strand scissions is subject to terminase action. The terminase reaction is supported by ATP, dATP, or beta, gamma-imido ATP, but not by other ribonucleoside triphosphates ADP, alpha, beta-methylene ATP, or beta, gamma-methylene ATP. A DNA-dependent ATPase, which hydrolyzes ATP to AMP, copurifies with the P2 P protein and is inactivated with the same kinetics as P activity upon treatment with N-ethylmaleimide. The ATPase does not display specificity for P2 DNA in vitro.