Genome comparison and genome context analysis were used to find a putative mobile element in the genome of Photorhabdus luminescens, an entomopathogenic bacterium. The element is composed of 16-bp direct repeats in the terminal regions, which are identical to a part of insertion sequences (ISs), a DNA methyltransferase gene homolog, two genes of unknown functions and an open reading frame (ORF) (plu0599) encoding a protein with no detectable sequence similarity to any known protein. The ORF (plu0599) product showed DNA endonuclease activity, when expressed in a cell-free expression system. Subsequently, the protein, named R.PluTI, was expressed in vivo, purified and found to be a novel type IIF restriction enzyme that recognizes 5'-GGCGC/C-3' (/ indicates position of cleavage). R.PluTI cleaves a two-site supercoiled substrate at both the sites faster than a one-site supercoiled substrate. The modification enzyme homolog encoded by plu0600, named M.PluTI, was expressed in Escherichia coli and shown to protect DNA from R.PluTI cleavage in vitro, and to suppress the lethal effects of R.PluTI expression in vivo. These results suggested that they constitute a restriction-modification system, present on the putative mobile element. Our approach thus allowed detection of a previously uncharacterized family of DNA-interacting proteins.