Transposons have contributed protein coding sequences to a unexpectedly large 
number of human genes. Except for the V(D)J recombinase and telomerase, all 
remain of unknown function. Here we investigate the activity of the human SETMAR 
protein, a highly expressed fusion between a histone H3 methylase and a mariner 
family transposase. Although SETMAR has demonstrated methylase activity and a 
DNA repair phenotype, its mode of action and the role of the transposase domain 
remain obscure. As a starting point to address this problem, we have dissected 
the activity of the transposase domain in the context of the full-length protein 
and the isolated transposase domain. Complete transposition of an engineered 
Hsmar1 transposon by the transposase domain was detected, although the extent of 
the reaction was limited by a severe defect for cleavage at the 3' ends of the 
element. Despite this problem, SETMAR retains robust activity for the other 
stages of the Hsmar1 transposition reaction, namely, site-specific DNA binding 
to the transposon ends, assembly of a paired-ends complex, cleavage of the 5' 
end of the element in Mn(2+), and integration at a TA dinucleotide target site. 
SETMAR is unlikely to catalyze transposition in the human genome, although the 
nicking activity may have a role in the DNA repair phenotype. The key activity 
for the mariner domain is therefore the robust DNA-binding and looping activity 
which has a high potential for targeting the histone methylase domain to the 
many thousands of specific binding sites in the human genome provided by copies 
of the Hsmar1 transposon.