Human exonuclease 1 (hEXO1) has been implicated in DNA mismatch repair (MMR), replication, and recombination, but the nature of its interaction with these cellular processes is still ambiguous. We show that hEXO1 colocalizes with proliferating cell nuclear antigen (PCNA) at DNA replication sites and that the C-terminal region of hEXO1 is sufficient for this localization. We also show that both hMLH1-hPMS2 (MutLalpha) and hMLH1-hEXO1 complexes are formed in a reaction mixture containing all three proteins. Moreover, hEXO1 5' double-stranded exonuclease activity on a homoduplex substrate but not on a substrate containing a G/T mismatch was inhibited by complex formation with hMSH2-hMSH6 (MutSalpha) or MutLalpha. Taken together, the results support a model in which hEXO1 plays a role in events at the replication sites as well as a functional role in the MMR and/or recombination processes.