The Mre11-Rad50 (MR) complex is a central player in DNA repair and is implicated in the processing of DNA ends caused by double strand breaks. Recent crystal structures of the MR complex suggest that several conformational rearrangements occur during its ATP hydrolysis cycle. A comparison of the Mre11 dimer interface from these structures suggests that the interface is dynamic in nature and may adopt several different arrangements. To probe the functional significance of the Mre11 dimer interface, we have generated and characterized a dimer disruption Mre11 mutant (L101D-Mre11). Although L101D-Mre11 binds to Rad50 and dsDNA with affinity comparable with the wild-type enzyme, it does not activate the ATP hydrolysis activity of Rad50, suggesting that the allosteric communication between Mre11 and Rad50 has been interrupted. Additionally, the dsDNA exonuclease activity of the L101D-MR complex has been reduced by 10-fold under conditions where processive exonuclease activity is required. However, we unexpectedly found that under steady state conditions, the nuclease activity of the L101D-MR complex is significantly greater than that of the wild-type complex. Based on steady state and single-turnover nuclease assays, we have assigned the rate-determining step of the steady state nuclease reaction to be the productive assembly of the complex at the dsDNA end. Together, our data suggest that the Mre11 dimer interface adopts at least two different states during the exonuclease reaction.