The NM23 gene family in humans is implicated in differentiation and cancer, but the biochemical mechanisms are unknown. Most NM23 proteins have phosphotransferase (nucleoside diphosphate kinase) activity, and the second human isoform, NM23-H2, also binds to a nuclease-hypersensitive c-MYC promoter element through which it activates c-MYC transcription. It is shown here that this DNA binding can result in double-stranded breaks. The DNA breaks occur within repeated sequence elements in the linear nuclease-hypersensitive duplex and leave staggered ends with 5-nucleotide-long 3'-extensions. The enzyme also cleaves supercoiled plasmid DNA to yield nicked circular and unit length linear products. The cleavage reaction requires only NM23-H2, DNA, Mg(2+), and buffer, occurs in the absence of denaturing conditions, and can be reversed by EDTA. The cleaved DNA strands have free 3'-OH groups, and protein is attached to the 5'-phosphoryl ends. Transfer of (32)P radioactivity from DNA to NM23-H2 has been observed, and a covalent polypeptide-DNA complex has been isolated and identified by Western blotting as NM23-H2. Since covalent protein-DNA complexes are known to serve the role of breaking and rejoining DNA strands, the present findings suggest that NM23-H2 is involved in DNA structural transactions necessary for the activity of the c-MYC promoter.