MutS homologues are highly conserved enzymes engaged in DNA mismatch repair (MMR), meiotic recombination and other DNA modifications. Genome sequencing projects have revealed that bacteria and plants possess a MutS homologue, MutS2. MutS2 lacks the mismatch-recognition domain of MutS, but contains an extra C-terminal region called the small MutS-related (Smr) domain. Sequences homologous to the Smr domain are annotated as ‘proteins of unknown function’ in various organisms ranging from bacteria to human. Although recent in vivo studies indicate that MutS2 plays an important role in recombinational events, there had been only limited characterization of the biochemical function of MutS2 and the Smr domain. We previously established that Thermus thermophilus MutS2 (ttMutS2) possesses endonuclease activity. In this study, we report that a Smr-deleted ttMutS2 mutant retains the dimerization, ATPase and DNA-binding activities, but has no endonuclease activity. Furthermore, the Smr domain alone was stable and functional in binding and incising DNA. It is noteworthy that an endonuclease activity is associated with a MutS homologue, which is generally thought to recognize specific DNA structures.