Argonaute proteins exist widely in eukaryotes and prokaryotes, and they are of great potential for molecular cloning, nucleic acid detection, DNA assembly, and gene editing. However, their overall properties are not satisfactory and hinder their broad applications. Herein, we investigated a prokaryotic Argonaute nuclease from a mesophilic bacterium Clostridium disporicum (CdAgo) and explored its overall properties, especially with 5’-hydroxylated (5’-OH) guides. We found that CdAgo can exclusively use single-stranded DNA (ssDNA) as guide to cleave ssDNA and plasmid targets. Further, we found the length of the efficient guide is narrower for the 5’-OH guide (17–20 nt) than for the 5′-phosphorylated guide (5′-P, 14–21 nt). Furthermore, we discovered that the 5’-OH guides can generally offer stronger mismatch discrimination than the 5′-P ones. The 5’-OH guides offer the narrower length range, higher mismatch discrimination and more accurate cleavage than the 5′-P guides. Therefore, 5’-OH-guide-directed CdAgo has great potential in biological and biomedical applications.