The Caenorhabditis elegans genes, exo-3 and apn-1, encode the proteins EXO-3 and APN-1, belonging to the exo III and endo IV families of apurinic/apyrimidinic (AP) endonucleases/3'-diesterases, respectively. Homologues of EXO-3 and APN-1 in E. coli and yeast have been clearly documented to repair AP sites and DNA strand breaks with blocked 3' ends to prevent genomic instability. Herein, we purified the C. elegans EXO-3, expressed as a Gst-fusion protein in yeast, and demonstrated that it possesses strong AP endonuclease and 3'-diesterase activities. However, unlike the E. coli counterpart exonuclease III, EXO-3 shows no significant level of 3' --> 5' exonuclease activity following incision at AP sites. In addition, EXO-3 lacks the ability to directly incise DNA at the 5' side of various oxidatively damaged bases, as observed for the human counterpart Ape1, suggesting that C. elegans evolved a member with tailored functions. Importantly, a variant form of EXO-3, E68A, demonstrates altered magnesium-binding properties, and although the in vitro AP endonuclease is nearly fully recovered in the presence of MgCl2, the 3'-diesterase activity is reduced when compared to the native enzyme. We suggest that Glu68 plays a role in coordinating Mg2+ binding for the enzyme catalytic mechanism. Further analysis reveals that neither purified Gst-EXO-3 nor the E68A variant forms a readily detectable DNA-protein complex with an oligonucleotide substrate containing either an AP site or an alpha,beta-unsaturated aldehyde at its 3' end. However, if the reaction is conducted in the presence of crude extracts derived from either yeast or C. elegans embryos, only E68A forms a distinct slow migrating DNA-protein complex with each of the substrates, suggesting that Glu68 may be required to facilitate the release of EXO-3 from the incised DNA to allow entry of the remaining components of the base-excision repair pathway. Thus, the slow migrating DNA-protein complex formed by the E68A variant could be indicative of a stalled repair process with associated factor(s).