Efficient γ-herpesvirus lytic phase replication requires a virally encoded UNG-type uracil-DNA glycosylase as a structural element of the viral replisome. Uniquely, γ-herpesvirus UNGs carry a seven or eight residue insertion of variable sequence in the otherwise highly conserved minor-groove DNA binding loop. In Epstein-Barr Virus [HHV-4] UNG, this motif forms a disc-shaped loop structure of unclear significance. To ascertain the biological role of the loop insertion, we determined the crystal structure of Kaposi's sarcoma-associated herpesvirus [HHV-8] UNG (kUNG) in its product complex with a uracil-containing dsDNA, as well as two structures of kUNG in its apo state. We find the disc-like conformation is conserved, but only when the kUNG DNA-binding cleft is occupied. Surprisingly, kUNG uses this structure to flip the orphaned partner base of the substrate deoxyuridine out of the DNA duplex while retaining canonical UNG deoxyuridine-flipping and catalysis. The orphan base is stably posed in the DNA major groove which, due to DNA backbone manipulation by kUNG, is more open than in other UNG-dsDNA structures. Mutagenesis suggests a model in which the kUNG loop is pinned outside the DNA-binding cleft until DNA docking promotes rigid structuring of the loop and duplex nucleotide flipping, a novel observation for UNGs.