The initiator RNAs of mammalian Okazaki fragments are thought to be removed by RNase HI and the 5'-3' flap endonuclease (FEN1). Earlier evidence indicated that the cleavage site of RNase HI is 5' of the last ribonucleotide at the RNA-DNA junction on an Okazaki substrate. In current work, highly purified calf RNase HI makes this exact cleavage in Okazaki fragments containing mismatches that distort the hybrid structure of the heteroduplex. Furthermore, even fully unannealed Okazaki fragments were cleaved. Clearly, the enzyme recognizes the transition from RNA to DNA on a single-stranded substrate and not the RNA/DNA heteroduplex structure. We have named this junction RNase activity. This activity exactly comigrates with RNase HI activity during purification strongly suggesting that both activities reside in the same enzyme. After junction cleavage, FEN1 removes the remaining ribonucleotide. Because FEN1 prefers a substrate with a single-stranded 5'-flap structure, the single-stranded activity of junction RNase suggests that Okazaki fragments are displaced to form a 5'-tail prior to cleavage by both nucleases.