Nucleotides function in a variety of biological reactions; however, they can undergo various chemical modifications. Such modified nucleotides may be toxic to cells if not eliminated from the nucleotide pools. We performed a screen for modified-nucleotide binding proteins and identified human nucleoside diphosphate linked moiety X-type motif 16 (NUDT16) protein as an inosine triphosphate (ITP)/xanthosine triphosphate (XTP)/GTP-binding protein. Recombinant NUDT16 hydrolyzes purine nucleoside diphosphates to the corresponding nucleoside monophosphates. Among 29 nucleotides examined, the highest k(cat)/K(m) values were for inosine diphosphate (IDP) and deoxyinosine diphosphate (dIDP). Moreover, NUDT16 moderately hydrolyzes (deoxy)inosine triphosphate ([d]ITP). NUDT16 is mostly localized in the nucleus, and especially in the nucleolus. Knockdown of NUDT16 in HeLa MR cells caused cell cycle arrest in S-phase, reduced cell proliferation, increased accumulation of single-strand breaks in nuclear DNA as well as increased levels of inosine in RNA. We thus concluded that NUDT16 is a (deoxy)inosine diphosphatase that may function mainly in the nucleus to protect cells from deleterious effects of (d)ITP.