Genetic analysis of the Drosophila Bloom's syndrome helicase homolog (mus309/DmBLM) indicates that DmBLM is required for the synthesis-dependent strand annealing (SDSA) pathway of homologous recombination. Here we report the first biochemical study of DmBLM. Recombinant, epitope-tagged DmBLM was expressed in Drosophila cell culture and highly purified protein was prepared from nuclear extracts. Purified DmBLM exists exclusively as a high molecular weight ( approximately 1.17 MDa) species, is a DNA-dependent ATPase, has 3'-->5' DNA helicase activity, prefers forked substrate DNAs and anneals complementary DNAs. High-affinity DNA binding is ATP-dependent and low-affinity ATP-independent interactions contribute to forked substrate DNA binding and drive strand annealing. DmBLM combines DNA strand displacement with DNA strand annealing to catalyze the displacement of one DNA strand while annealing a second complementary DNA strand.