Antibody and T cell receptor genes are assembled from gene segments by V(D)J recombination to produce an almost infinitely diverse repertoire of antigen specificities. Recombination is initiated by cleavage of conserved recombination signal sequences (RSS) by RAG1 and RAG2 during lymphocyte development. Recent evidence demonstrates that recombination can occur at noncanonical RSS sites within Ig genes or at other loci, outside the context of normal lymphocyte receptor gene rearrangement. We have characterized the ability of the RAG proteins to bind and cleave a cryptic RSS (cRSS) located within an Ig V(H) gene segment. The RAG proteins bound with sequence specificity to either the consensus RSS or the cRSS. The RAG proteins nick the cRSS on both the top and bottom strands, thereby bypassing the formation of the DNA hairpin intermediate observed in RAG cleavage of canonical RSS substrates. We propose that the RAG proteins may utilize an alternative mechanism for double-stranded DNA cleavage, depending on the substrate sequence. These results have implications for further diversification of the antigen receptor repertoire as well as the role of the RAG proteins in genomic instability.