In mammalian cells, repair of DNA double-strand breaks (DSBs) by nonhomologous end-joining (NHEJ) is critical for genome stability. Although the end-bridging and ligation steps of NHEJ have been reconstituted in vitro, little is known about the end-processing reactions that occur before ligation. Recently, functionally homologous end-bridging and ligation activities have been identified in prokarya. Consistent with its homology to polymerases and nucleases, we demonstrate that DNA ligase D from Mycobacterium tuberculosis (Mt-Lig) possesses a unique variety of nucleotidyl transferase activities, including gap-filling polymerase, terminal transferase, and primase, and is also a 3' to 5' exonuclease. These enzyme activities allow the Mt-Ku and Mt-Lig proteins to join incompatible DSB ends in vitro, as well as to reconstitute NHEJ in vivo in yeast. These results demonstrate that prokaryotic Ku and ligase form a bona fide NHEJ system that encodes all the recognition, processing, and ligation activities required for DSB repair.