Drosophila melanogaster XPG-like endonuclease (DmGEN) is a new category of nuclease belonging to the RAD2/XPG family. The DmGEN protein has two nuclease domains (N and I domains) similar to XPG/class I nucleases; however, unlike class I nucleases, in DmGEN these two nuclease domains are positioned close to each other as in FEN-1/class II and EXO-1/class III nucleases. To confirm the properties of DmGEN, we characterized the active-site mutant protein (E143A E145A) and found that DmGEN had flap endonuclease activity. DmGEN possessed weak nick-dependent 5′−3′ exonuclease activity. Unlike XPG, DmGEN could not incise the bubble structure. Interestingly, based on characterization of flap endonuclease activity, DmGEN preferred the blocked-flap structure as a substrate. This feature is distinctly different from FEN-1. Furthermore, DmGEN cleaved the lagging strand of the model replication fork. Immunostaining revealed that DmGEN was present in the nucleus of actively proliferating Drosophila embryos. Thus, our studies revealed that DmGEN belongs to a new class (class IV) of the RAD2/XPG nuclease family. The biochemical properties of DmGEN and its possible role are also discussed.