We have studied the interaction of purified FLP protein with restriction fragments from the substrate 2mu circle DNA of yeast. We find that FLP protects about 50 bp of DNA from nonspecific nuclease digestion. The protected site consists of two 13 bp inverted repeat sequences separated by an 8 bp spacer region. A third 13 bp element is also protected by binding of the FLP protein. We demonstrate that FLP introduces single- and double-strand breaks into the substrate DNA. This site-specific cleavage occurs at the margins of the spacer region, generating 8 bp 5' protruding ends with 5'-OH and 3'-protein-bound termini. Binding to mutant sites and half-sites demonstrates that the third symmetry element is not important for binding and cleavage by the FLP protein. The integrity of the core region is important for the cleavage activity of FLP.