The dinucleotide CA found at the termini of transposable phage Mu also occurs at the termini of a large class of transposable elements, including HIV, all retroviruses and many retrotransposons. In order to understand the importance of this sequence conservation, the activity of all 16 dinucleotide permutations of the termini was first examined using a sensitive plasmid-based in vivo transposition assay. The reactivity of these substrates varied over several orders of magnitude in vivo, with substitutions at the A position being more severely impaired than those at the C position. The same general hierarchy of reactivity was observed in vitro using mutant oligonucleotide substrates. These experiments revealed that CA was not important for the chemistry of strand transfer, and that the block in the activity of the mutant substrates was at the stage of assembly of a stable transpososome. Given that DNA at the Mu-host junctions is melted/distorted concomitantly with transpososome assembly, we consider the hypothesis that the CA dinucleotide has been selected at transposon termini primarily for its significant conformational mobility.