An undecamer oligonucleotide probe based on a pair of deoxythymidines flanked by several modified nucleotides is a specific and highly efficient biosensor for micrococcal nuclease (MNase), an endonuclease produced by Staphylococcus aureus. Herein, the interaction mode and cleavage process on such oligonucleotide probes are identified and described for the first time. Also, we designed truncated pentamer probes as the minimum-length substrates required for specific and efficient biosensing. By means of computational (virtual docking) and experimental (ultra-performance liquid chromatography-mass spectrometry and matrix-assisted laser desorption ionization time-of-flight) techniques, we perform a sequence/structure-activity relationship analysis, propose a catalytically active substrate-enzyme complex, and elucidate a novel two-step phosphodiester bond hydrolysis mechanism, identifying the cleavage sites and detecting and quantifying the resulting probe fragments. Our results unravel a picture of both the enzyme-biosensor complex and a two-step cleavage/biosensing mechanism, key to the rational oligonucleotide design process.