Homologous recombination in Escherichia coli is stimulated at DNA sequences known as chi sites. Stimulation requires the multifunctional RecBCD enzyme, which is both a helicase and a 3' --> 5' exonuclease. Upon recognition of a properly oriented chi site, the 3' --> 5' exonuclease activity is attenuated. Here we show that in addition to attenuation of the 3' --> 5' exonuclease activity, recognition of chi by the RecBCD enzyme also up-regulates a nuclease activity of the opposite polarity, resulting in an enzyme that now preferentially degrades 5' --> 3'. These results demonstrate that chi is a unique regulatory element that converts the antirecombinogenic form of the RecBCD enzyme into a recombinogenic form by causing two distinct enzymatic changes: attenuation of the 3' --> 5' nuclease activity, and up-regulation of the 5' --> 3' nuclease activity. The consequence of chi recognition is the production of a recombination intermediate possessing a 3'-ssDNA overhang terminating at the chi sequence. This processing of a dsDNA end to a 3'-ssDNA overhang parallels that which occurs during the initation of homologous recombination in other pathways in E. coli, and in other organisms such as the yeast Saccharomyces cerevisiae.