We have characterized cloned His-tag human RNase H1. The activity of the enzyme exhibited a bell-shaped response to divalent cations and pH. The optimum conditions for catalysis consisted of 1 mM Mg(2+) and pH 7-8. In the presence of Mg(2+), Mn(2+) was inhibitory. Human RNase H1 shares many enzymatic properties with Escherichia coli RNase H1. The human enzyme cleaves RNA in a DNA-RNA duplex resulting in products with 5'-phosphate and 3'-hydroxy termini, can cleave overhanging single strand RNA adjacent to a DNA-RNA duplex, and is unable to cleave substrates in which either the RNA or DNA strand has 2' modifications at the cleavage site. Human RNase H1 binds selectively to "A-form"-type duplexes with approximately 10-20-fold greater affinity than that observed for E. coli RNase H1. The human enzyme displays a greater initial rate of cleavage of a heteroduplex-containing RNA-phosphorothioate DNA than an RNA-DNA duplex. Unlike the E. coli enzyme, human RNase H1 displays a strong positional preference for cleavage, i.e. it cleaves between 8 and 12 nucleotides from the 5'-RNA-3'-DNA terminus of the duplex. Within the preferred cleavage site, the enzyme displays modest sequence preference with GU being a preferred dinucleotide. The enzyme is inhibited by single-strand phosphorothioate oligonucleotides and displays no evidence of processivity. The minimum RNA-DNA duplex length that supports cleavage is 6 base pairs, and the minimum RNA-DNA "gap size" that supports cleavage is 5 base pairs.