The NlaIII restriction enzyme isolated from Neisseria lactamica recognizes the sequence 5'-CATG-3', cleaving after the G to generate a four base 3' overhang. The NlaIII methylase and a portion of the NlaIII endonuclease gene were cloned into E. coli by the methylase selection method, and the remaining portion of the NlaIII endonuclease gene was cloned by inverse PCR. The nucleotide sequence of the endonuclease gene and the methylase gene were determined. The NlaIII endonuclease gene is 693 bp, encoding a protein with predicted molecular weight of 26487. The NlaIII methylase gene was identical with that previously reported [Labbe, D., Joltke, H.J. and Lau, P.C. (1990) Cloning and characterization of two tandemly arranged DNA methyltransferse genes of Neisseria lactamica: an adenine-specific M.NlaIII and a cytosine-type methylase. Mol. Gen. Genet. 224, 101-110]. The endonuclease and methylase genes overlap by four bases and are transcribed in the same orientation. The endonuclease gene was cloned into an improved T7 vector, and a high level of NlaIII endonuclease expression was achieved in E. coli.