The DNase domain-containing protein TATDN1 is a conserved nuclease in both prokaryotes and eukaryotes. It was previously implicated to play a role in apoptotic DNA fragmentation in yeast and C. elegans. However, its biological function in higher organisms, such as vertebrates, is unknown. Here, we report that zebrafish TATDN1 (zTATDN1) possesses a novel endonuclease activity, which first makes a nick at the DNA duplex and subsequently converts the nick into a DNA double-strand break in vitro. This biochemical property allows zTATDN1 to catalyze decatenation of catenated kinetoplast DNA to produce separated linear DNA in vitro. We further determine that zTATDN1 is predominantly expressed in eye cells during embryonic development. Knockdown of TATDN1 in zebrafish embryos results in an abnormal cell cycle progression, formation of polyploidy and aberrant chromatin structures. Consequently, the TATDN1-deficient morphants have disordered eye cell layers and significantly smaller eyes compared with the WT control. Altogether, our current studies suggest that zTATDN1 plays an important role in chromosome segregation and eye development in zebrafish.