Saccharomyces cerevisiae RAD7 and RAD16 genes function together in the nucleotide excision repair of transcriptionally inactive DNA. The RAD7- and RAD16-encoded proteins exist as a tight complex named nucleotide excision repair factor 4 or NEF4. Previously, we showed that NEF4 binds UV-damaged DNA with high specificity and with a dependence upon ATP and that inclusion of NEF4 to the reconstituted nucleotide excision repair system consisting of purified NEF1, NEF2, NEF3, and replication protein A results in marked stimulation of damage-specific DNA incision. Here we show that NEF4 possesses an ATPase activity that is entirely dependent on a DNA cofactor and that double-stranded DNA is twice as effective as single-stranded DNA in activating ATP hydrolysis. Even though DNA binding is promoted by the nonhydrolyzable ATP analogue adenosine 5'-O-(thiotriphosphate) (ATPgammaS), damage binding is more proficient with ATP than with ATPgammaS. Interestingly, UV irradiation of double-stranded DNA results in a pronounced attenuation of the ATPase activity. Taken together, our results suggest a model in which ATP hydrolysis by NEF4 fuels the translocation of NEF4 on DNA in search of UV lesions and damage binding by NEF4 leads to a down-regulation of the ATPase activity. Damage-bound NEF4 could then serve as a nucleation point for the assembly of other repair components.