The reaction mechanism of nuclease P1 from Penicillium citrinum has been investigated using single‐stranded dithiophosphorylated di‐, tetra‐, and hexanucleotides as substrate analogs. The complexes crystallize in tetragonal and orthorhombic space groups and have been solved by molecular replacement. The high resolution structures give a clear picture of base recognition by P1 nuclease at its two nucleotide‐binding sites, especially the 1.8 Å structure of a P1‐tetranucleotide complex which can be considered a P1‐product complex. The observed binding modes are in agreement with a catalytic mechanism where the two closely spaced zinc ions activate the attacking water while the third, more exposed zinc ion stabilizes the leaving 03' oxyanion. Stacking as well as hydrogen bonding interactions with the base 5' to the cleaved phosphodiester bond are important elements of substrate binding and recognition. Modelling of a productive P1‐substrate complex based on the solved structures suggests steric hindrance as the likely reason for the resistance of Rp‐phosphorothioates and phosphorodithioates. Differences with the highly homologous nuclease S1 from Aspargillus oryzae are discussed. Proteins 32:414–424, 1998. © 1998 Wiley‐Liss, Inc.