Human L1 elements are highly abundant poly(A) (non-LTR) retrotransposons whose second open reading frame (ORF2) encodes a reverse transcriptase (RT). We have identified an endonuclease (EN) domain at the L1 ORF2 N-terminus that is highly conserved among poly(A) retrotransposons and resembles the apurinic/apyrimidinic (AP) endonucleases. Purified L1 EN protein (L1 ENp) makes 5'-PO4, 3'-OH nicks in supercoiled plasmids, shows no preference for AP sites, and preferentially cleaves sequences resembling L1 in vivo target sequences. Mutations in conserved amino acid residues of L1 EN abolish its nicking activity and eliminate L1 retrotransposition. We propose that L1 EN cleaves the target site for L1 insertion and primes reverse transcription.