Here we report that the human DNA mismatch complex MSH2-MSH3 recognizes small loops by a mechanism different from that of MSH2-MSH6 for single-base mismatches. The subunits MSH2 and MSH3 can bind either ADP or ATP with similar affinities. Upon binding to a DNA loop, however, MSH2-MSH3 adopts a single 'nucleotide signature', in which the MSH2 subunit is occupied by an ADP molecule and the MSH3 subunit is empty. Subsequent ATP binding and hydrolysis in the MSH3 subunit promote ADP-ATP exchange in the MSH2 subunit to yield a hydrolysis-independent ATP-MSH2-MSH3-ADP intermediate. Human MSH2-MSH3 and yeast Msh2-Msh6 both undergo ADP-ATP exchange in the Msh2 subunit but, apparently, have opposite requirements for ATP hydrolysis: ADP release from DNA-bound Msh2-Msh6 requires ATP stabilization in the Msh6 subunit, whereas ADP release from DNA-bound MSH2-MSH3 requires ATP hydrolysis in the MSH3 subunit. We propose a model in which lesion binding converts MSH2-MSH3 into a distinct nucleotide-bound form that is poised to be a molecular sensor for lesion specificity.