UV damage endonuclease (UVDE) from Schizosaccharomyces pombe initiates repair of UV lesions and abasic sites by nicking the DNA 5' to the damaged site. In this paper we show that in addition UVDE incises DNA containing a single-strand nick or gap, but that the enzymatic activity on these substrates as well as on abasic sites strongly depends on the presence of a neighbouring pyrimidine residue. This indicates that, although UVDE may have been derived from an ancestral AP endonuclease its major substrate is a UV lesion and not an AP site. We propose that UVDE rotates two nucleotides into a pocket of the protein in order to bring the scissile bond close to the active site and that purine bases are excluded from this pocket. We also show that in the DNA complex residue Tyr-358 of UVDE penetrates the DNA helix causing unstacking of two residues opposite the lesion, thereby stabilizing the protein-DNA interaction, most likely by promoting bending of the DNA. In the absence of Tyr-358 the enzyme exhibits an increased catalytic activity on UV-induced lesions, but only at a lower pH of 6.5. At physiological conditions (pH 7.5) the mutant protein completely looses its catalytic activity although it can still bind to the DNA. We propose that in addition to stabilizing the bend in the DNA the hydrophobic side chain of Tyr-358 shields the active site from exposure to the solvent.