Mre11 and Rad50 are the catalytic components of a highly conserved DNA repair complex that functions in many aspects of DNA metabolism involving double-strand breaks. The ATPase domains in Rad50 are related to the ABC transporter family of ATPases, previously shown to share structural similarities with adenylate kinases. Here we demonstrate that Mre11/Rad50 complexes from three organisms catalyze the reversible adenylate kinase reaction in vitro. Mutation of the conserved signature motif reduces the adenylate kinase activity of Rad50 but does not reduce ATP hydrolysis. This mutant resembles a rad50 null strain with respect to meiosis and telomere maintenance in S. cerevisiae, correlating adenylate kinase activity with in vivo functions. An adenylate kinase inhibitor blocks Mre11/Rad50-dependent DNA tethering in vitro and in cell-free extracts, indicating that adenylate kinase activity by Mre11/Rad50 promotes DNA-DNA associations. We propose a model for Rad50 that incorporates both ATPase and adenylate kinase reactions as critical activities that regulate Rad50 functions.