Bacterially expressed Epstein-Barr virus (EBV) DNase was purified to 98% purity and used as the source for characterization of the enzyme activities. Complete digestion of DNA by EBV DNase yielded 5'-monophosphate nucleosides as the final products. During the logarithmic phase of the reaction, EBV DNase acted processively on dsDNA but distributively on ssDNA. Both 5' to 3' and 3' to 5' exonuclease activities were present, although the former was shown to be IO-fold stronger. No significant discrepancy was seen in the liberation of end-labeled nucleotides by DNase when substrates with 5'-protruding, blunt, or 3'-protruding ends were used. EBV DNase was demonstrated also to have an endonuclease activity using supercoiled plasmid DNA as substrate. Two preferential dsDNA cleavage sites were mapped on pBS-TR, a pBlueScript vector containing one copy of the EBV terminal repeat; both are in vector sequences. Finally, an N-terminally truncated EBV major DNA binding protein, but not EA-D, was shown to inhibit EBV DNase activity. This inhibitory effect may due to direct protein-protein interactions between EBV DNase and the major DNA binding protein. The biological significance of these characteristics is discussed. (C) 1995 Academic Press, Inc.