The human ARD-1 (activator of RNA decay) cDNA sequence can rescue mutations in the Escherichia coli rne gene, which specifies the essential endoribonuclease RNase E, resulting in RNase E-like cleavages in vivo in rne-defective bacteria and in vitro in extracts isolated from these cells (Wang, M., and Cohen, S. N. (1994) Proc. Natl. Acad. Sci. U. S. A. 91, 10591-10595). Recent studies indicate that the 13.3-kDa protein encoded by ARD-1 cDNA is almost identical to the carboxyl-terminal end of the bovine protein NIPP-1, a nuclear inhibitor of protein phosphatase 1; separate transcripts formed by alternative splicing are proposed to encode the discrete ARD-1 and combined ARD-1/NIPP-1 products (Van Eynde, A., Wera, S., Beullens, M. , Torrekens, S., Van Leuven, F., Stalmans, W., and Bollens, M. (1995) J. Biol. Chem. 270, 28068-28074). Here we show that affinity column-purified protein encoded by human ARD-1 cDNA in E. coli is a site-specific Mg2+-dependent endoribonuclease that binds in vitro to RNase E substrates, cleaves RNA at the same sites as RNase E, and, like RNase E, generates 5' phosphate termini at sites of cleavage. Our results indicate that the ARD-1 peptide can function as a ribonucleolytic analog of E. coli RNase E as well as a domain of the protein phosphatase inhibitor, NIPP-1.