Three cytosolic and one plasma membrane-bound 5'-nucleotidases have been cloned and characterized. Their various substrate specificities suggest widely different functions in nucleotide metabolism. We now describe a 5'-nucleotidase in mitochondria. The enzyme, named dNT-2, dephosphorylates specifically the 5'- and 2'(3')-phosphates of uracil and thymine deoxyribonucleotides. The cDNA of human dNT-2 codes for a 25.9-kDa polypeptide with a typical mitochondrial leader peptide, providing the structural basis for two-step processing during import into the mitochondrial matrix. The deduced amino acid sequence is 52% identical to that of a recently described cytosolic deoxyribonucleotidase (dNT-1). The two enzymes share many catalytic properties, but dNT-2 shows a narrower substrate specificity. Mitochondrial localization of dNT-2 was demonstrated by the mitochondrial fluorescence of 293 cells expressing a dNT-2-green fluorescent protein (GFP) fusion protein. 293 cells expressing fusion proteins without leader peptide or with dNT-1 showed a cytosolic fluorescence. During in vitro import into mitochondria, the preprotein lost the leader peptide. We suggest that dNT-2 protects mitochondrial DNA replication from overproduction of dTTP, in particular in resting cells. Mitochondrial toxicity of dTTP can be inferred from a severe inborn error of metabolism in which the loss of thymidine phosphorylase led to dTTP accumulation and aberrant mitochondrial DNA replication. We localized the gene for dNT-2 on chromosome 17p11.2 in the Smith-Magenis syndrome-critical region, raising the possibility that dNT-2 is involved in the etiology of this genetic disease.