The postcleavage complex involved in V(D)J joining is known to possess a transpositional strand transfer activity, whose physiological role is yet to be clarified. Here we report that RAG1 and RAG2 proteins in the signal end (SE) complex cleave the 3-overhanging structure of the synthetic coding-end (CE) DNA in two successive steps in vitro. The 3-overhanging structure is attacked by the SE complex imprecisely, near the double-stranded/single-stranded (ds/ss) junction, and transferred to the SE. The transferred overhang is then resolved and cleaved precisely at the ds/ss junction, generating either the linear or the circular cleavage products. Thus, the blunt-end structure is restored for the SE and variably processed ends are generated for the synthetic CE. This 3-processing activity is observed not only with the core RAG2 but also with the full-length protein.V(D)J joining plays key roles in activating and diversifying the antigen receptor genes. In the initial phase of V(D)J joining, the protein products of recombination-activating genes (RAG1 and RAG2) (39, 48) recognize the recombination signal sequences (RSS), each consisting of a conserved 7-mer (CACAGTG) and a conserved 9-mer (ACAAAAACC), separated by a spacer of constant length of either 12 or 23 bp (6,17,35,44,45,46,52,53). For the coordinate cleavage of RSSs, synaptic complex formation of the 12-and 23-RSSs is required (8,18,59). RSS DNA is cleaved by RAG proteins in two successive steps, nicking and hairpin formation (31, 58). A nick is first introduced at the coding and 7-mer border on the top strand. The resulting 3Ј-hydroxyl group (3Ј-OH) then attacks the bottom strand to form a hairpin structure at the coding end (CE) and a blunt end at the signal end (SE). After the cleavage of RSSs, the SEs stably stay with the RAG proteins in vitro (2,18,21,36). Physical association of the CEs with the SE complex has been shown to occur in vitro (18,56). This association in the presence of other repair proteins appears to be necessary for the CE processing in vivo (18,20,41,56,60).In the joining phase of V(D)J recombination, CEs are processed and ligated to form a coding joint. Several factors are required in DNA end joining, including the Ku heterodimer (Ku70/80), the catalytic subunit of DNA-dependent protein kinase (DNA-PKcs), Artemis, XRCC4, and DNA ligase IV (4,11,14,15,27,28,34,38,42,43,54,61). It has been shown that the Artemis/DNA-PKcs complex opens the hairpin a few nucleotides from the tip, generating the 3Ј-overhanging structure (30, 50). After the hairpin opening, the CEs are modified by nucleotide deletions and additions for junctional diversification (50). For nucleotide additions, terminal deoxynucleotidyltransferase (TdT) has been reported to be responsible for the non-germ line encoded nucleotides (N) (13, 24). In contrast, the exact mechanism for the nucleotide deletions remains largely unknown. The RAG proteins are known to mediate the strand transfer of the SE to the hairpin CE or to the doublestranded (ds) DNA, resulting in the aberrant jo...