Bloom syndrome is a rare, autosomal recessive inherited disorder in humans. The product of the Bloom syndrome mutated gene, designated BLM, is a member of the RecQ helicase family. BLM has been proposed to function at the interface of replication and recombination, and to facilitate the repair of DNA damage. Here, we report in vivo physical interaction and colocalization of BLM and a DNA structure-specific endonuclease, Mus81, at sites of stalled replication forks outside the promyelocytic leukemia nuclear bodies during the S-phase arrest of the cell cycle. Amino acids 125 to 244 of Mus81 interact with the C-terminal region (amino acids 1,007-1,417) of BLM. Whereas Mus81 does not have any effect on the helicase activity of BLM, BLM can stimulate Mus81 endonuclease activity on the nicked Holliday junctions and 3' flap. This stimulation is due to enhanced binding of Mus81 to the DNA substrates. These data suggest a new function of BLM in cooperating with Mus81 during processing and restoration of stalled replication forks.