As part of Rep78/68's involvement in adeno-associated virus (AAV) DNA replication, these highly related, AAV encoded proteins bind to the AAV terminal repeat (TR) DNA and endonucleolytically cleave one strand at the terminal resolution site ("trs" nicking activity) of the TR DNA, a site adjacent to the DNA binding site, 21 bps from the nearest GCTC motif. We have constructed a Rep78 mutant, replacing leucine-threonine at amino acids 64-65 with histidine-methionine (64LH65TM). This mutant, expressed as a chimeric protein with maltose binding protein (MBP), displays Mg++ dependent endonuclease activity, but does not bind to the AAV TR as determined in the conventional electrophoretic mobility shift assay (EMSA). It is also found that wild type MBP-Rep78 endonucleolytically nicks at multiple sites in addition to the previously recognized trs site. These data suggest that the nicking activity is independent of conventional DNA binding activity as measured by EMSA and further suggest that a separate form of DNA recognition by Rep78, not measured by the EMSA, is taking place which allows for endonuclease activity.