DNA ligase D (LigD) performs end remodeling and end sealing reactions during nonhomologous end joining in bacteria. Pseudomonas aeruginosa LigD consists of a central ATP-dependent ligase domain fused to a C-terminal polymerase domain and an N-terminal phosphoesterase (PE) module. The PE domain catalyzes manganese-dependent phosphodiesterase and phosphomonoesterase reactions at the 3' end of the primer strand of a primer-template. The phosphodiesterase cleaves a 3'-terminal diribonucleotide to yield a primer strand with a ribonucleoside 3'-PO4 terminus. The phosphomonoesterase converts a terminal ribonucleoside 3'-PO4 or deoxyribonucleoside 3'-PO4 of a primer-template to a 3'-OH. Here we report that the phosphodiesterase and phosphomonoesterase activities are both dependent on the presence and length of the 5' single-strand tail of the primer-template substrate. Although the phosphodiesterase activity is strictly dependent on the 2'-OH of the penultimate ribose, it is indifferent to a 2'-OH versus a 2'-H on the terminal nucleoside. Incision at the ribonucleotide linkage is suppressed when the 2'-OH is moved by 1 nucleotide in the 5' direction, suggesting that LigD is an exoribonuclease that cleaves the 3'-terminal phosphodiester. We report the effects of conservative amino acid substitutions at residues: (i) His(42), His(48), Asp(50), Arg(52), His(84), and Tyr(88), which are essential for both the ribonuclease and 3'-phosphatase activities; (ii) Arg(14), Asp(15), Glu(21), and Glu(82), which are critical for 3'-phosphatase activity but not 3'-ribonucleoside removal; and (iii) at Lys(66) and Arg(76), which participate selectively in the 3'-ribonuclease reaction. The results suggest roles for individual functional groups in metal binding and/or phosphoesterase chemistry.