Polynucleotide kinase/phosphatase (PNKP) is a critical mammalian DNA repair enzyme that generates 5'-phosphate and 3'-hydroxyl groups at damaged DNA termini that are required for subsequent processing by DNA ligases and polymerases. The PNKP phosphatase domain recognizes 3'-phosphate termini within DNA nicks, gaps, or at double- or single-strand breaks. Here we present a mechanistic rationale for the recognition of damaged DNA termini by the PNKP phosphatase domain. The crystal structures of PNKP bound to single-stranded DNA substrates reveals a narrow active site cleft that accommodates a single-stranded substrate in a sequence-independent manner. Biochemical studies suggest that the terminal base pairs of double-stranded substrates near the 3'-phosphate are destabilized by PNKP to allow substrate access to the active site. A positively charged surface distinct from the active site specifically facilitates interactions with double-stranded substrates, providing a complex DNA binding surface that enables the recognition of diverse substrates.