Drosophila Rrp1 protein purified from embryos has four tightly associated enzymatic activities: DNA strand transfer, single-strand DNA renaturation, 3'-exonuclease, and apurinic endonuclease. Copurifying with these activities is a single polypeptide that has an apparent M(r) of 105,000 when estimated by SDS-polyacrylamide gel electrophoresis. To determine if this polypeptide is sufficient for these activities, it has been overexpressed in Escherichia coli. In crude extracts of E. coli cells, an ATP-independent Mg(2+)-dependent strand transfer activity is observed upon activation of the promoter that drives expression of Rrp1. Rrp1 protein purified from induced E. coli cells has electrophoretic, chromatographic, and enzymatic properties similar to those of Drosophila Rrp1 protein. The carboxyl-terminal region of Rrp1 (amino acids 428-679) is homologous to E. coli exonuclease III. Rrp1 deleted for this region cannot carry out DNA strand transfer, but can renature complementary single-strand DNA. The strand transfer activity of this truncated protein can be restored if DNA 3'-exonuclease is provided in trans by pretreating the double-strand DNA substrate with E. coli exonuclease III. This demonstrates a likely role of the exonuclease in the in vitro DNA strand transfer reaction carried out by Rrp1 protein. Such a role is also suggested by an analysis of the polarity of the strand transfer reaction.