Endonuclease II (EndoII) of bacteriophage T4 is a GIY-YIG enzyme involved in host DNA breakdown during phage infection of E. coli. EndoII combines features of restriction endonucleases with those of homing endonucleases in that it breaks down DNA foreign to itself but recognizes a 16 bp long asymmetric and ambiguous sequence. This investigation addresses the biological function of EndoII, its mode of interaction with its substrate and roles of individual residues in catalysis, sequence recognition and binding. It is shown here that EndoII increases the frequency of non-homologous recombination in phage-infected cells, showing that EndoII indeed can induce recombinational events. Although single-stranded nicks are frequent in in vitro reactions with purified protein, the enzyme is found to produce mostly double-stranded breaks in vivo, since nicks are repaired. Mutations of residues positioned on the putative catalytic surface result in severely reduced catalytic activity, while residues in the N-terminal region and a middle region (MR) appear to mainly contribute to substrate binding. Mutation of the putatively magnesium-binding residue E118 renders the enzyme catalytically inactive. Residues K76 (in the MR and positioned on the catalytic surface) and G49 and R57 (on the catalytic surface) also contribute to substrate recognition. All mutants bind as tetramers to two DNA molecules, indicating that the wildtype would also bind as a tetramer. EndoII E118A alone can bind also in monomeric and dimeric form to one DNA molecule, possibly because the glutamate charge normally repels the DNA. The solved crystal structure of tetrameric EndoII E118A shows a striking X-shape with two putative catalytic surfaces to each side positioned so that double-stranded cleavage would require severe DNA distortion. Combination of all data suggests that upon binding in vivo EndoII scans the DNA for a second binding site, binding to both sites but nicking or cleaving only one of them