A novel endodextranase from Paenibacillus sp. (Paenibacillus sp. dextranase; PsDex) was found to mainly produce isomaltotetraose and small amounts of cycloisomaltooligosaccharides (CIs) with a degree of polymerization of 7-14 from dextran. The 1,696-amino acid sequence belonging to the glycosyl hydrolase family 66 (GH-66) has a long insertion (632 residues; Thr(451)-Val(1082)), a portion of which shares identity (35% at Ala(39)-Ser(1304) of PsDex) with Pro(32)-Ala(755) of CI glucanotransferase (CITase), a GH-66 enzyme that catalyzes the formation of CIs from dextran. This homologous sequence (Val(837)-Met(932) for PsDex and Tyr(404)-Tyr(492) for CITase), similar to carbohydrate-binding module 35, was not found in other endodextranases (Dexs) devoid of CITase activity. These results support the classification of GH-66 enzymes into three types: (i) Dex showing only dextranolytic activity, (ii) Dex catalyzing hydrolysis with low cyclization activity, and (iii) CITase showing CI-forming activity with low dextranolytic activity. The fact that a C-terminal truncated enzyme (having Ala(39)-Ser(1304)) has 50% wild-type PsDex activity indicates that the C-terminal 392 residues are not involved in hydrolysis. GH-66 enzymes possess four conserved acidic residues (Asp(189), Asp(340), Glu(412), and Asp(1254) of PsDex) of catalytic candidates. Their amide mutants decreased activity (1⁄1,500 to 1⁄40,000 times), and D1254N had 36% activity. A chemical rescue approach was applied to D189A, D340G, and E412Q using α-isomaltotetraosyl fluoride with NaN(3). D340G or E412Q formed a β- or α-isomaltotetraosyl azide, respectively, strongly indicating Asp(340) and Glu(412) as a nucleophile and acid/base catalyst, respectively. Interestingly, D189A synthesized small sized dextran from α-isomaltotetraosyl fluoride in the presence of NaN(3).