Lynch syndrome (hereditary nonpolypsis colorectal cancer or HNPCC) is a common cancer predisposition syndrome. Predisposition to cancer in this syndrome results from increased accumulation of mutations due to defective mismatch repair (MMR) caused by a mutation in one of the mismatch repair genes MLH1, MSH2, MSH6 or PMS2/scPMS1. To better understand the function of Mlh1-Pms1 in MMR, we used Saccharomyces cerevisiae to identify six pms1 mutations (pms1-G683E, pms1-C817R, pms1-C848S, pms1-H850R, pms1-H703A and pms1-E707A) that were weakly dominant in wild-type cells, which surprisingly caused a strong MMR defect when present on low copy plasmids in an exo1Δ mutant. Molecular modeling showed these mutations caused amino acid substitutions in the metal coordination pocket of the Pms1 endonuclease active site and biochemical studies showed that they inactivated the endonuclease activity. This model of Mlh1-Pms1 suggested that the Mlh1-FERC motif contributes to the endonuclease active site. Consistent with this, the mlh1-E767stp mutation caused both MMR and endonuclease defects similar to those caused by the dominant pms1 mutations whereas mutations affecting the predicted metal coordinating residue Mlh1-C769 had no effect. These studies establish that the Mlh1-Pms1 endonuclease is required for MMR in a previously uncharacterized Exo1-independent MMR pathway.