Pseudomonas aeruginosa DNA ligase D (PaeLigD) exemplifies a family of bacterial DNA end-joining proteins that consist of a ligase domain fused to a polymerase domain and a putative nuclease module. The LigD polymerase preferentially adds single ribonucleotides at blunt DNA ends and, as we show here, is also capable of adding up to 4 ribonucleotides to a DNA primer-template. We report that PaeLigD has an intrinsic ability to resect the short tract of 3'-ribonucleotides of a primer-template substrate to the point at which the primer strand has a single 3'-ribonucleotide remaining. The failure to digest beyond this point reflects a requirement for a 2'-OH group on the penultimate nucleoside of the primer strand. Replacing the 2'-OH by a 2'-F, 2'-NH2, 2'-OCH3, or 2'-H abolishes the resection reaction. The ribonucleotide resection activity resides within a 187-amino acid N-terminal nuclease domain and is the result of at least two component steps: (i) the 3'-terminal nucleoside is first removed to yield a primer strand with a ribonucleoside 3'-PO4 terminus, and (ii) the 3'-PO4 is hydrolyzed to a 3'-OH. The 3'-ribonuclease and 3'-phosphatase activities are both dependent on a divalent cation, specifically manganese. PaeLigD preferentially remodels the 3'-ends of a duplex primer-template substrate rather than a single strand of identical composition, and it prefers DNA primer strands containing a short 3'-ribonucleotide tract to an all-RNA primer. The nuclease domain of PaeLigD and its bacterial homologs has no apparent structural or mechanistic similarity to previously characterized nucleases. Thus, we surmise that it exemplifies a novel phosphoesterase family, defined in part by conserved residues Asp-50, Arg-52, and His-84, which are essential for the 3'-ribonuclease and 3'-phosphatase reactions.