The reactivity of endonuclease VII (gp49 of phage T4) with DNA-loops of eight, four, or one nucleotide, or any of 12 possible base mismatches was tested in vitro. Endonuclease VII introduces double-strand breaks by nick and counter-nick within six nucleotides 3' from the mispairings. High relative cleavage efficiencies at mismatches in heteroduplexes correlate with their decreased thermal stability and vice versa. A delay between nick and counter-nick was sufficient to allow T4 DNA-polymerase and T4 DNA-ligase to correct a C/C-mismatch in vitro, thereby saving the DNA from double-strand breakage. Very short repair tracks of three to four nucleotides mapped between the mismatch and one of the formerly induced nicks, which were subsequently sealed by DNA ligase.