Exonucleolytic editing is a major contributor to the fidelity of DNA replication by the multisubunit DNA polymerase (pol) III holoenzyme. To investigate the source of editing specificity, we have studied the isolated exonuclease subunit, epsilon, and the pol III core subassembly, which carries the epsilon, theta, and alpha (polymerase) subunits. Using oligonucleotides with specific terminal mismatches, we have found that both epsilon and pol III core preferentially excise a mispaired 3' terminus and therefore have intrinsic editing specificity. For both epsilon and pol III core, exonuclease activity is much more effective with single-strand DNA; with a double-strand DNA, the exonuclease is strongly temperature-dependent. We conclude that the epsilon subunit of pol III holoenzyme is itself a specific editing exonuclease and that the source of specificity is the greater melting capacity of a mispaired 3' terminus.