Most restriction endonucleases use Mg 2؉ to hydrolyze phosphodiester bonds at specific DNA sites. We show here that BfiI, a metal-independent restriction enzyme from the phospholipase D superfamily, catalyzes both DNA hydrolysis and transesterification reactions at its recognition site. In the presence of alcohols such as ethanol or glycerol, it attaches the alcohol covalently to the 5 terminus of the cleaved DNA. Under certain conditions, the terminal 3 -OH of one DNA strand can attack the target phosphodiester bond in the other strand to create a DNA hairpin. Transesterification reactions on DNA with phosphorothioate linkages at the target bond proceed with retention of stereoconfiguration at the phosphorus, indicating, uniquely for a restriction enzyme, a twostep mechanism. We propose that BfiI first makes a covalent enzyme-DNA intermediate, and then it resolves it by a nucleophilic attack of water or an alcohol, to yield hydrolysis or transesterification products, respectively.I n the presence of Mg 2ϩ , type II restriction endonucleases (REases) hydrolyze specific phosphodiester bonds in DNA to yield 5Ј-phosphate and 3Ј-hydroxyl termini (1). The stereochemical pathway for phosphodiester hydrolysis by four such enzymes, EcoRI, EcoRV, SfiI, and HpaII (2-4), have been determined. All proceed with inversion of configuration at the scissile phosphate, which implies an odd number of chemical steps in the hydrolytic reaction, and it is most simply accounted for by a direct in-line displacement of the 3Ј-leaving group by water (5-7). High-resolution structures are available for many more REases than have been analyzed stereochemically (1). Their active sites are generally similar, with several carboxylates to act as ligands for Mg 2ϩ in spatially equivalent positions (1). All such enzymes probably act in the same way, by using water to attack the scissile phosphate, to invert its configuration.Endonucleases from the transposase-retroviral integrase family, like MuA or HIV-integrase, catalyze at a single active site two sets of reactions on DNA (4, 8, 9). The first, the endonucleolytic cleavage of the 3Ј end of the transposon or viral DNA, is mechanistically similar to the hydrolysis reactions of REases. The second, termed DNA strand transfer, is a single-step transesterification in which the newly liberated 3Ј-OH group attacks and becomes linked to a phosphate group in the target DNA (9, 10).We ask here whether the BfiI REase can catalyze transesterification reactions in addition to DNA hydrolysis. BfiI cleaves DNA at specified positions downstream from an asymmetric recognition sequence (11). Unlike other REases, it functions without metal ions (12). The N-terminal half of BfiI (13, 14) is similar to Nuc, an EDTA-resistant nuclease from Salmonella typhimurium (15, 16) that belongs to the phospholipase D (PLD) superfamily. The PLD superfamily is a diverse group of proteins that includes phospholipases, phospholipid synthases, bacterial toxins, phosphodiesterases (PDEs), and nucleases (17, 18). The PLD enzymes catal...