A novel DNase from the digestive tract of the spruce budworm (Choristoneura fumiferana) has been isolated and characterized. This DNase has two features that distinguish it from other known DNases: (1) it has a pH optimum of 10.5 to 11; (2) it plays an important role in the conversion of the insecticidal crystal protein from Bacillus thuringiensis to the active DNA-free toxin in the larval gut. Only one digestive DNase with an apparent molecular mass of 23 kDa was found and no associated carbohydrate was detected. It has some similarities to pancreatic DNase I in that divalent alkaline metal ion is required for activity and it is inhibited by monovalent cations. In particular, Mg(2+) and Ca(2+) were the most effective activators. Transition metal ions also activated the enzyme but were less effective. The enzyme is an endonuclease that hydrolyzes single and double stranded DNA but shows a higher specificity for single stranded DNA. The purified enzyme acted synergistically with proteases on crystals from Bacillus thuringiensis to yield the DNA-free toxin. To our knowledge, this is the first characterization of DNase activity in insect larvae and provides strong evidence that a DNase is an integral component of the larval digestive system.