Polynucleotide phosphorylase (PNPase) plays synthetic and degradative roles in bacterial RNA metabolism; it is also suggested to participate in bacterial DNA transactions. Here we characterize and compare the RNA and DNA modifying activities of Mycobacterium smegmatis PNPase. The full-length (763-aa) M. smegmatis PNPase is a homotrimeric enzyme with Mg(2+)•PO(4)-dependent RNA 3'-phosphorylase and Mg(2+)•ADP-dependent RNA polymerase activities. We find that the enzyme is also a Mn(2+)•dADP-dependent DNA polymerase and a Mn(2+)•PO(4)-dependent DNA 3'-phosphorylase. The Mn(2+)•DNA and Mg(2+)•RNA end modifying activities of mycobacterial PNPase are coordinately ablated by mutating the putative manganese ligand Asp526, signifying that both metals likely bind to the same site on PNPase. Deletions of the C-terminal S1 and KH domains of mycobacterial PNPase exert opposite effects on the RNA and DNA modifying activities. Subtracting the S1 domain diminishes RNA phosphorylase and polymerase activity; simultaneous deletion of the S1 and KH domains further cripples the enzyme with respect to RNA substrates. By contrast, the S1 and KH domain deletions enhance the DNA polymerase and phosphorylase activity of mycobacterial PNPase. We observe two distinct modes of nucleic acid binding by mycobacterial PNPase: (i) metal-independent RNA-specific binding via the S1 domain, and (ii) metal-dependent binding to RNA or DNA that is optimal when the S1 domain is deleted. These findings add a new dimension to our understanding of PNPase specificity, whereby the C-terminal modules serve a dual purpose: (i) to help capture an RNA polynucleotide substrate for processive 3' end additions or resections, and (ii) to provide a specificity filter that selects against a DNA polynucleotide substrate.