The human XRCC2 gene was recently identified by its ability to complement a hamster cell line, irs1, which is sensitive to DNA-damaging agents and shows genetic instability. The XRCC2 protein is highly conserved in mammalian species and has structural features, including a putative ATP-binding domain (P-loop), consistent with membership of the RecA/RAD51 family of recombination-repair proteins. We show that a hybrid XRCC2-green fluorescent protein, which was found to be functional by complementation, localizes to the nucleus. We have established a functional link between XRCC2 and RAD51 by looking at damage-dependent RAD51 focus formation in the irs1 cell line. Little or no formation of RAD51 foci occurred in irs1. This effect was specific to the loss of XRCC2 because transfection of the gene into irs1 restored normal levels of focus formation. Surprisingly, XRCC2 genes carrying site-specific mutations in P-loop residues were found to be able to complement the XRCC2-deficient irs1 line for a number of different end points. We conclude that XRCC2 is important in the early stages of homologous recombination in mammalian cells to facilitate RAD51-dependent recombination repair but that it does not make use of ATP binding to promote this function.