In addition to its DNA helicase activity, Werner syndrome protein (WRN) also possesses an exonuclease activity (Shen, J.-C., Gray, M. D., Kamath-Loeb, A. S., Fry, M., Oshima, J., and Loeb, L. A. (1998) J. Biol. Chem. 273, 34139-34144). Here we describe the properties of nearly homogeneous WRN exonuclease. WRN exonuclease hydrolyzes a recessed strand in a partial DNA duplex but does not significantly digest single-stranded DNA, blunt-ended duplex, or a protruding strand of a partial duplex. Although DNA is hydrolyzed in the absence of nucleoside triphosphates, nuclease activity is markedly stimulated by ATP, dATP, or CTP. WRN exonuclease digests DNA with a 3' --> 5' directionality to generate 5'-dNMP products, and DNA strands terminating with either a 3'-OH or 3'-PO4 group are hydrolyzed to similar extents. A recessed DNA strand with a single 3'-terminal mismatch is hydrolyzed more efficiently by WRN than one with a complementary nucleotide, but the enzyme fails to hydrolyze a DNA strand terminating with two mismatched bases. WRN exonuclease is distinguished from known mammalian DNA nucleases by its covalent association with a DNA helicase, preference for a recessed DNA strand, stimulation by ATP, ability to equally digest DNA with 3'-OH or 3'-PO4 termini, and its preferential digestion of DNA with a single 3'-terminal mismatch.