Influenza virus polymerase initiates the biosynthesis of its own mRNAs with capped 10- to 13-nucleotide fragments cleaved from cellular (pre-)mRNAs. Two activities are required for this cap-snatching activity: specific binding of the cap structure and an endonuclease activity. Recent work has shown that the cap-binding site is situated in the central part of the PB2 subunit and that the endonuclease activity is situated in the N-terminal domain of the PA subunit (PA-Nter). The influenza endonuclease is a member of the PD-(D/E)XK family of nucleases that use divalent metal ions for nucleic acid cleavage. Here we analyze the metal binding and endonuclease activities of eight PA-Nter single-point mutants. We show by calorimetry that the wild-type active site binds two Mn(2+) ions and has a 500-fold higher affinity for manganese than for magnesium ions. The endonuclease activity of the isolated mutant domains are compared with the cap-dependent transcription activities of identical mutations in trimeric recombinant polymerases previously described by other groups. Mutations that inactivate the endonuclease activity in the isolated PA-Nter knock out the transcription but not replication activity in the recombinant polymerase. We confirm the importance of a number of active-site residues and identify some residues that may be involved in the positioning of the RNA substrate in the active site. Our results validate the use of the isolated endonuclease domain in a drug-design process for new anti-influenza virus compounds.