Exonuclease III catalyzes the removal of mononucleotides from dsDNA starting from a 3´-OH at nicks, blunt ends, recessed ends and 3´-overhangs of less than 4 bases, yielding nucleoside 5´-phosphates. The enzyme contains DNA 3′-phosphatase, hydrolyzing 3′-terminal phosphomonoesters and AP endonuclease, cleaving phosphodiester bonds at apurinic or apyrimidinic sites to produce 5′-termini that are base-free deoxyribose 5′-phosphate residues. The enzyme has ribonuclease H activity, preferentially degrading the RNA strand in a DNA-RNA hybrid duplex.