The T-DNA portion of the Agrobacterium tumefaciens tumor-inducing (Ti) plasmid integrates into plant nuclear DNA. Direct repeats define the T-DNA ends; transfer begins when the VirD2 endonuclease produces a site-specific nick in the right-hand border repeat and attaches to the 5' end of the nicked strand. Subsequent events generate linear single-stranded VirD2-bound DNA molecules that include the entire T-DNA (T-strands). VirD2 protein contains a nuclear localization signal (NLS) near the C terminus and may direct bound T-strands to plant nuclei. We constructed mutations in virD2 and showed that the NLS was important for tumorigenesis, although T-strand production occurred normally in its absence. A tobacco etch virus NLS, substituted for the VirD2 NLS, restored tumor-inducing activity. Amino acids (the omega sequence) at the C terminus of VirD2, outside the NLS and the endonuclease domain, contributed significantly to tumorigenesis, suggesting that VirD2 may serve a third important function in T-DNA transfer.