We report the properties of the new AloI restriction and modification enzyme from Acinetobacter lwoffi Ks 4-8 that recognizes the DNA target 5' GGA(N)6GTTC3' (complementary strand 5' GAAC(N)6TCC3'), and the nucleotide sequence of the gene encoding this enzyme. AloI is a bifunctional large polypeptide (deduced M(r) 143 kDa) revealing both DNA endonuclease and methyltransferase activities. Depending on reaction cofactors, AloI cleaves double-stranded DNA on both strands, seven bases on the 5' side, and 12-13 bases on the 3' side of its recognition sequence, and modifies adenine residues in both DNA strands in the target sequence yielding N6-methyladenine. For cleavage activity AloI maintains an absolute requirement for Mg(2+) and does not depend on or is stimulated by either ATP or S-adenosyl-L-methionine. Modification function requires the presence of S-adenosyl-L-methionine and is stimulated by metal ions (Ca(2+)). The C-terminal and central parts of the protein were found to be homologous to certain specificity (HsdS) and modification (HsdM) subunits of type I R-M systems, respectively. The N-terminal part of the protein possesses the putative endonucleolytic motif DXnEXK of restriction endonucleases. The deduced amino acid sequence of AloI shares significant homology with polypeptides encoding HaeIV and CjeI restriction-modification proteins at the N-terminal and central, but not at the C-terminal domains. The organization of AloI implies that its evolution involved fusion of an endonuclease and the two subunits, HsdM and HsdS, of type I restriction enzymes. According to the structure and function properties AloI may be regarded as one more representative of a newly emerging group of HaeIV-like restriction endonucleases. Discovery of these enzymes opens new opportunities for constructing restriction endonucleases with a new specificity.