RAG1 and RAG2 initiate V(D)J recombination, the process of rearranging the antigen-binding domain of immunoglobulins and T-cell receptors, by introducing site-specific double-strand breaks (DSB) in chromosomal DNA during lymphocyte development. These breaks are generated in two steps, nicking of one strand (hydrolysis), followed by hairpin formation (transesterification). The nature and location of the RAG active site(s) have remained unknown. Because acidic amino acids have a critical role in catalyzing DNA cleavage by nucleases and recombinases that require divalent metal ions as cofactors, we hypothesized that acidic active site residues are likewise essential for RAG-mediated DNA cleavage. We altered each conserved acidic amino acid in RAG1 and RAG2 by site-directed mutagenesis, and examined >100 mutants using a combination of in vivo and in vitro analyses. No conserved acidic amino acids in RAG2 were critical for catalysis; three RAG1 mutants retained normal DNA binding, but were catalytically inactive for both nicking and hairpin formation. These data argue that one active site in RAG1 performs both steps of the cleavage reaction. Amino acid substitution experiments that changed the metal ion specificity suggest that at least one of these three residues contacts the metal ion(s) directly. These data suggest that RAG-mediated DNA cleavage involves coordination of divalent metal ion(s) by RAG1. V(D)J recombination is the process by which V (variable), D (diversity), and J (joining) gene segments are joined to form an exon that encodes the antigen-binding domain of immunoglobulins and T-cell receptors. These gene segments, termed coding segments, are flanked by recombination signal sequences (RSSs) that serve as recognition motifs for the recombinase machinery. The lymphoid-specific proteins RAG1 and RAG2 bind to the RSS and together constitute a site-specific endonuclease that introduces a double-strand break (DSB) between the RSS and the adjacent coding segment. DSB formation proceeds by two sequential single-strand cleavage events. In the first step of this reaction, hydrolysis, water is used as a nucleophile to attack a phosphodiester bond, introducing a nick precisely between the RSS and the coding segment. In the second step, transesterification, the newly formed 3Ј OH is used as a nucleophile to attack the second phosphodiester bond, creating a covalently sealed hairpin coding end and a blunt, 5Ј-phosphorylated signal end .V(D)J recombination is central to a functional immune system. The activity of the RAG proteins must be carefully regulated, as inappropriate rearrangements catalyzed by this system can be oncogenic (Tycko and Sklar 1990;Korsmeyer 1992). Thus, it is critical to decipher the mechanism of catalysis to understand the multiple regulatory controls that guard against inappropriate recombination events. The nature and the location of the active site(s) responsible for hydrolysis and transesterification have not been established; consequently, it is not known whether a single active site carr...