The premature human aging Werner syndrome (WS) is caused by mutation of the RecQ-family WRN helicase, which is unique in possessing also 3'-5' exonuclease activity. WS patients show significant genomic instability with elevated cancer incidence. WRN is implicated in restraining illegitimate recombination, especially during DNA replication. Here we identify a Drosophila ortholog of the WRN exonuclease encoded by the CG7670 locus. The predicted DmWRNexo protein shows conservation of structural motifs and key catalytic residues with human WRN exonuclease, but entirely lacks a helicase domain. Insertion of a piggyBac element into the 5' UTR of CG7670 severely reduces gene expression. DmWRNexo mutant flies homozygous for this insertional allele of CG7670 are thus severely hypomorphic; although adults show no gross morphological abnormalities, females are sterile. Like human WS cells, we show that the DmWRNexo mutant flies are hypersensitive to the topoisomerase I inhibitor camptothecin. Furthermore, these mutant flies show highly elevated rates of mitotic DNA recombination resulting from excessive reciprocal exchange. This study identifies a novel WRN ortholog in flies and demonstrates an important role for WRN exonuclease in maintaining genome stability.