The 5' nuclease of DNA polymerase I (Pol I) of Escherichia coli is a member of an important class of prokaryotic and eukaryotic nucleases, involved in DNA replication and repair, with specificity for the junction between single-stranded and duplex DNA. We have investigated the interaction of the 5' nuclease domain with DNA substrates from the standpoint of both the protein and the DNA. Phosphate ethylation interference showed that the nuclease binds to the nucleotides immediately surrounding the cleavage site and also contacts the complementary strand one-half turn away, indicating that contacts are made to one face only of the duplex portion of the DNA substrate. Phosphodiester contacts were investigated further using DNA substrates carrying unique methylphosphonate substitutions, together with mutations in the 5' nuclease. These experiments suggested that two highly conserved basic residues, Lys(78) and Arg(81), are close to the phosphodiester immediately 5' to the cleavage site, while a third highly conserved residue, Arg(20), may interact with the phosphodiester 3' to the cleavage site. Our results provide strong support for a DNA binding model proposed for the related exonuclease from bacteriophage T5, in which the conserved basic residues mentioned above define the two ends of a helical arch that forms part of the single-stranded DNA-binding region. The nine highly conserved carboxylates in the active site region appear to play a relatively minor role in substrate binding, although they are crucial for catalysis. In addition to binding the DNA backbone around the cleavage point, the 5' nuclease also has a binding site for one or two frayed bases at the 3' end of an upstream primer strand. In agreement with work in related systems, 5' nuclease cleavage is blocked by duplex DNA in the 5' tail, but the enzyme is quite tolerant of abasic DNA or polarity reversal within the 5' tail.