Mobility of the phage T4 td intron depends on activity of an intron-encoded endonuclease (I-TevI), which cleaves a homologous intronless (delta In) target gene. The double-strand break initiates a recombination event that leads to intron transfer. We found previously that I-TevI cleaves td delta In target DNA 23-26 nucleotides upstream of the intron insertion site. DNase I-footprinting experiments and gel-shift assays indicate that I-TevI makes primary contacts around the intron insertion site. A synthetic DNA duplex spanning the insertion site but lacking the cleavage site was shown to bind I-TevI specifically, and when cloned, to direct cleavage into vector sequences. The behavior of the cloned duplex and that of deletion and insertion mutants support a primary role for sequences surrounding the insertion site in directing I-TevI binding, conferring cleavage ability, and determining cleavage polarity. On the other hand, sequences around the cleavage site were shown to influence cleavage efficiency and cut-site selection. The role of cleavage-site sequences in determining cleavage distance argues against a strict "ruler" mechanism for cleavage by I-TevI. The complex nature of the homing site recognized by this unusual type of endonuclease is considered in the context of intron spread.