Saccharomyces cerevisiae RAD50, MRE11, and XRS2 genes are essential for telomere length maintenance, cell cycle checkpoint signaling, meiotic recombination, and DNA double-stranded break (DSB) repair via nonhomologous end joining and homologous recombination. The DSB repair pathways that draw upon Mre11-Rad50-Xrs2 subunits are complex, so their mechanistic features remain poorly understood. Moreover, the molecular basis of DSB end resection in yeast mre11-nuclease deficient mutants and Mre11 nuclease-independent activation of ATM in mammals remains unknown and adds a new dimension to many unanswered questions about the mechanism of DSB repair. Here, we demonstrate that S. cerevisiae Mre11 (ScMre11) exhibits higher binding affinity for single- over double-stranded DNA and intermediates of recombination and repair and catalyzes robust unwinding of substrates possessing a 3' single-stranded DNA overhang but not of 5' overhangs or blunt-ended DNA fragments. Additional evidence disclosed that ScMre11 nuclease activity is dispensable for its DNA binding and unwinding activity, thus uncovering the molecular basis underlying DSB end processing in mre11 nuclease deficient mutants. Significantly, Rad50, Xrs2, and Sae2 potentiate the DNA unwinding activity of Mre11, thus underscoring functional interaction among the components of DSB end repair machinery. Our results also show that ScMre11 by itself binds to DSB ends, then promotes end bridging of duplex DNA, and directly interacts with Sae2. We discuss the implications of these results in the context of an alternative mechanism for DSB end processing and the generation of single-stranded DNA for DNA repair and homologous recombination.