Barnase, the ribonuclease from Bacillus amyloliquefaciens, has been cloned and expressed in Escherichia coli [Hartley, R. W. (1988) J. Mol. Biol. 202, 913-915], thus enabling the overproduction and site-directed mutagenesis of one of the smallest enzymes (Mr equals 12,382). As barnase is also composed of just a single polypeptide chain with no disulfide bridges and has a reversible folding transition, it affords a fine system for studying protein folding and design. We show here that the recombinant enzyme has properties identical with those of the authentic enzyme, characterize the basic kinetics and specificity of the enzyme, and, using site-directed mutagenesis, identify key residues involved in catalysis to provide evidence that supports the classic ribonuclease mechanism. The wild-type enzyme catalyzes the hydrolysis of dinucleotides of structure GpN. There is a prime requirement for G and a preference for A greater than G greater than C greater than U for N. The pH-activity curve for the transesterification step of dinucleotides is bell shaped with an optimum for kcat/KM and kcat at about pH 5. The enzyme is far more active toward long RNA molecules, and the pH optimum for kcat is at 8.5. The activity of barnase toward dinucleotide substrates is about 0.5% of that of the highly homologous T1 nuclease at pH 5.9, but barnase is twice as active as T1 toward RNA at pH 8.5. There must be important subsite interactions that contribute to catalysis in barnase in addition to those immediately on either side of the scissile bond.(ABSTRACT TRUNCATED AT 250 WORDS)