Saccharomyces cerevisiae Rad2 protein functions in the incision step of the nucleotide excision repair of DNA damaged by ultraviolet light. Rad2 was previously shown to act endonucleolytically on circular single-stranded M13 DNA and also to have a 5'-->3' exonuclease activity (Habraken, Y., Sung, P., Prakash, L., and Prakash, S. (1993) Nature 366, 365-368; Habraken, Y., Sung, P., Prakash, L., and Prakash, S. (1994) J. Biol. Chem. 269, 31342-31345). Using two different branched DNA structures, pseudo Y and flap, we have determined that Rad2 specifically cleaves the 5'-overhanging single strand in these DNAs. Rad2 nuclease is more active on the flap structure than on the pseudo Y structure. Rad2 also acts on a bubble structure that contains an unpaired region of 14 nucleotides, but with a lower efficiency than on the pseudo Y or flap structure. The incision points occur at and around the single strand-duplex junction in the three classes of DNA structures.