During V(D)J recombination, processing of branched coding end intermediates is essential for generating junctional diversity. Here, we report that the RAG1/ RAG2 recombinase is a 3' flap endonuclease. Substrates of this nuclease activity include various coding end intermediates, suggesting a direct role for RAG1/ RAG2 in generating junctional diversity during V(D)J recombination. Evidence is also provided indicating that site-specific RSS nicking involves RAG1/RAG2-mediated processing of a localized flap-like structure, implying 3' flap nicking in multiple DNA processing reactions. We have also demonstrated that the bacterial transposase Tn10 contains a 3' flap endonuclease activity, suggesting a mechanistic parallel between RAG1/RAG2 and other transposases. Based on these data, we propose that numerous transposases may facilitate genomic evolution by removing single-stranded extensions during the processing of excision site junctions.