The residues forming the 3'-->5' exonuclease active site of phi 29 DNA polymerase, located at the N-terminal conserved motifs Exo I, Exo II and Exo III, have been defined by site-directed mutagenesis (Bernad, A., Blanco, L., Lazaro, J. M., Martin, G., and Salas, M. (1989) Cell 59, 219-228; Soengas, M. S., Esteban, J. A., Lazaro, J. M., Bernad, A., Blasco, M. A., Salas, M., and Blanco, L. (1992) EMBO J. 11, 4227-4237). To understand their catalytic role, the residual exonuclease activity of mutants at these active site residues has been kinetically studied. The critical function of residues Asp12, Glu14, Asp66, and Asp169 is supported by a 10(5)-fold reduction in the exonuclease catalytic rate upon single mutation. Residue Tyr165 seems to play a secondary role in the exonuclease reaction based on the 10(2)-10(3)-fold reduced catalytic rate of mutants Y165F and Y165C. Most of the mutants were specially active in the presence of Mn2+ ions, which could be indicative of a direct involvement of these residues in a metal ion-assisted exonucleolytic reaction. The data obtained strongly suggest that the 3'-->5' exonuclease active site of phi 29 DNA polymerase is structurally and functionally similar to that of the Escherichia coli DNA polymerase I. In addition, these residues were also very important for the strand displacement ability of phi 29 DNA polymerase, suggesting a structural overlapping of this activity with the 3'-->5' exonuclease.