A Z-DNA binding protein of 140,000 M(r) has been purified from chicken lungs by sedimentation through 40%(w/w) sucrose and Z-DNA affinity chromatography. Specificity of the protein for Z-DNA was confirmed by competition with polyd(CG) that had been stabilized in the Z-DNA conformer by chemical bromination and also with a supercoiled plasmid that contains a Z-DNA-forming insert. In addition to a Z-DNA binding site, the protein also has a separate binding site for double-stranded RNA. Peptide sequence of the protein shows that it has high similarity to the RNA editing enzyme double-stranded RNA adenosine deaminase (dsRAD), which deaminates adenosine in dsRNA to form inosine. The Z-DNA binding protein has this enzymatic activity, confirming its identity to dsRAD. Recombinant human dsRAD also binds to Z-DNA. Z-DNA is stabilized in a sequence-dependent manner by negative supercoiling, which occurs in actively transcribed genes upstream to RNA polymerase. It is proposed that Z-DNA links editing to transcription by localizing dsRAD to a particular region of a gene and thus determines the efficiency with which an RNA is edited. The presence of Z-DNA forming elements in many genes raises the possibility that RNA editing by dsRAD is far more prevalent than is currently thought.