The initial chemical steps in Tn5 transposition result in blunt end cleavag
e of the transposon from the donor DNA. We demonstrate that this cleavage o
ccurs via a hairpin intermediate. The first step is a 3' hydrolytic nick by
transposase. The free 3'OH then attacks the phosphodiester bond on the opp
osite strand, forming a hairpin at the transposon end. In addition to formi
ng precise hairpins, Tn5 transposase can form imprecise hairpins. This is t
he first example of imprecise hairpin formation on transposon end DNA. To u
ndergo strand transfer, the hairpin must to be resolved by a transposase-ca
talyzed hydrolytic cleavage. We show that both precise and imprecise hairpi
ns are opened by transposase. A transposition mechanism utilizing a hairpin
intermediate allows a single transposase active site to cleave both 3' and
5' strands without massive protein/DNA rearrangements.