The mechanism of the 3'-5' exonuclease activity of the Klenow fragment of DNA polymerase I has been investigated with a combination of biochemical and spectroscopic techniques. Site-directed mutagenesis was used to make alanine substitutions of side chains that interact with the DNA substrate on the 5' side of the scissile phosphodiester bond. Kinetic parameters for 3'-5' exonuclease cleavage of single- and double-stranded DNA substrates were determined for each mutant protein in order to probe the role of the selected side chains in the exonuclease reaction. The results indicate that side chains that interact with the penultimate nucleotide (Q419, N420, and Y423) are important for anchoring the DNA substrate at the active site or ensuring proper geometry of the scissile phosphate. In contrast, side chains that interact with the third nucleotide from the DNA terminus (K422 and R455) do not participate directly in exonuclease cleavage of single-stranded DNA. Alanine substitutions of Q419, Y423, and R455 have markedly different effects on the cleavage of single- and double-stranded DNA, causing a much greater loss of activity in the case of a duplex substrate. Time-resolved fluorescence anisotropy decay measurements with a dansyl-labeled primer/template indicate that the Q419A, Y423A, and R455A mutations disrupted the ability of the Klenow fragment to melt duplex DNA and bind the frayed terminus at the exonuclease site. In contrast, the N420A mutation stabilized binding of a duplex terminus to the exonuclease site, suggesting that the N420 side chain facilitates the 3'-5' exonuclease reaction by introducing strain into the bound DNA substrate. Together, these results demonstrate that protein side chains that interact with the second or third nucleotides from the terminus can participate in both the chemical step of the exonuclease reaction, by anchoring the substrate in the active site or by ensuring proper geometry of the scissile phosphate, and in the prechemical steps of double-stranded DNA hydrolysis, by facilitating duplex melting.