Faithful DNA replication involves the removal of RNA residues from genomic DNA prior to the ligation of nascent DNA fragments in all living organisms. Because the physiological roles of archaeal type 2 RNase H are not fully understood, the substrate structure requirements for the detection of RNase H activity need further clarification. Biochemical characterization of a single RNase H detected within the genome of Pyrococcus abyssi showed that this type 2 RNase H is an Mg- and alkaline pH-dependent enzyme. PabRNase HII showed RNase activity and acted as a specific endonuclease on RNA-DNA/DNA duplexes. This specific cleavage, 1 nucleotide upstream of the RNA-DNA junction, occurred on a substrate in which RNA initiators had to be fully annealed to the cDNA template. On the other hand, a 5' RNA flap Okazaki fragment intermediate impaired PabRNase HII endonuclease activity. Furthermore, introduction of mismatches into the RNA portion near the RNA-DNA junction decreased both the specificity and the efficiency of cleavage by PabRNase HII. Additionally, PabRNase HII could cleave a single ribonucleotide embedded in a double-stranded DNA. Our data revealed PabRNase HII as a dual-function enzyme likely required for the completion of DNA replication and DNA repair.