Two steps in the uptake of DNA by Diplococcus pneumoniae were characterized by analyzing mutants defective in transformation. A strain deficient in the two major deoxyribonucleases of D. pneumoniae takes up DNA normally and converts it to single strands within the cell and oligonucleotide fragments outside the cell. Extracts of this strain contain a residual deoxyribonuclease that produces similar oligonucleotide fragments in vitro. This enzyme is missing in transformation-defective mutants blocked in the second or entry step. Cells of this mutant class bind large amounts of DNA to their surface in a form accessible to external agents. Another class of nontransformable mutants fails to bind DNA at all. Their deoxyribonuclease content is unchanged, and they are apparently blocked in the first or binding step of DNA uptake. The binding step requires a source of energy and prior activation of the cells by competence factor. Entry may be independent of these requirements and may come about by action of the deoxyribonuclease on one strand of DNA with energy for the transport of the intact strand deriving from hydrolysis of the degraded strand. The enzyme may thus act as a DNA translocase.