TDP2 is a multifunctional enzyme previously known for its role in signal transduction as TRAF and TNF receptor-associated protein (TTRAP) and ETS1-associated protein 2 (EAPII). The gene has recently been renamed TDP2 because it plays a critical role for the repair of topoisomerase II cleavage complexes (Top2cc) and encodes an enzyme that hydrolyzes 5'-tyrosine-DNA adducts that mimic abortive Top2cc. Here we further elucidate the DNA-processing activities of human recombinant TDP2 and its biochemical characteristics. The preferred substrate for TDP2 is single-stranded DNA or duplex DNA with a four-base pair overhang, which is consistent with the known structure of Top2cc or Top3cc. The k(cat)/K(m) of TDP1 and TDP2 was determined. It was found to be 4 × 10(5) s(-1)M(-1) for TDP2 using single-stranded 5'-tyrosyl-DNA. The processing of substrates as short as five nucleotides long suggests that TDP2 can directly bind DNA ends. 5'-Phosphodiesterase activity requires a phosphotyrosyl linkage and tolerates an extended group attached to the tyrosine. TDP2 requires Mg(2+) or Mn(2+) for efficient catalysis but is weakly active with Ca(2+) or Zn(2+). Titration with Ca(2+) demonstrates a two-metal binding site in TDP2. Sequence alignment suggests that TDP2 contains four conserved catalytic motifs shared by Mg(2+)-dependent endonucleases, such as APE1. Substitutions at each of the four catalytic motifs identified key residues Asn-120, Glu-152, Asp-262, and His-351, whose mutation to alanine significantly reduced or completely abolished enzymatic activity. Our study characterizes the substrate specificity and kinetic parameters of TDP2. In addition, a two-metal catalytic mechanism is proposed.