A gene encoding a putative DNA helicase from Staphylococcus aureus USA300 was cloned and expressed in Escherichia coli. The protein was purified to over 90% purity by chromatography. The purified enzyme, SauUSI, predominantly cleaves modified DNA containing 5mC and 5-hydroxymethylcytosine. Cleavage of 5mC-modified plasmids indicated that the sites S5mCNGS (S = C or G) are preferentially digested. The endonuclease activity requires the presence of adenosine triphosphate (ATP) or dATP whereas the non-hydrolyzable γ-S-ATP does not support activity. SauUSI activity was inhibited by ethylenediaminetetraacetic acid. It is most active in Mg(++) buffers. No companion methylase gene was found near the SauUSI restriction gene. The absence of a cognate methylase and cleavage of modified DNA indicate that SauUSI belongs to type IV restriction endonucleases, a group that includes EcoK McrBC and Mrr. SauUSI belongs to a family of highly similar homologs found in other sequenced S. aureus, S. epidermidis and S. carnosus genomes. More distant SauUSI orthologs can be found in over 150 sequenced bacterial/archaea genomes. Finally, we demonstrated the biological function of the type IV REase in restricting 5mC-modified plasmid DNA by transformation into clinical S. aureus strain SA564, and in restricting phage λ infection when the endonuclease is expressed in E. coli.