The Partner and Localizer of BRCA2 (PALB2) is a scaffold protein that links BRCA1 with BRCA2 to initiate homologous recombination (HR). PALB2 interaction with DNA strongly enhances HR efficiency in cells. The PALB2 DNA-binding domain (PALB2-DBD) supports strand exchange, a complex multistep reaction conducted by only a few proteins such as RecA-like recombinases and Rad52. Using bioinformatics analysis, small-angle X-ray scattering, circular dichroism, and electron paramagnetic spectroscopy, we determined that PALB2-DBD is an intrinsically disordered region (IDR) forming compact molten globule-like dimer. IDRs contribute to oligomerization synergistically with the coiled-coil interaction. Using confocal single-molecule FRET we demonstrated that PALB2-DBD compacts single-stranded DNA even in the absence of DNA secondary structures. The compaction is bimodal, oligomerization-dependent, and is driven by IDRs, suggesting a novel strand exchange mechanism. Intrinsically disordered proteins (IDPs) are prevalent in the human proteome. Novel DNA binding properties of PALB2-DBD and the complexity of strand exchange mechanism significantly expands the functional repertoire of IDPs. Multivalent interactions and bioinformatics analysis suggest that PALB2 function is likely to depend on formation of protein-nucleic acids condensates. Similar intrinsically disordered DBDs may use chaperone-like mechanism to aid formation and resolution of DNA and RNA multichain intermediates during DNA replication, repair and recombination.