The non-essential VTS1 gene of Saccharomyces cerevisiae is highly conserved in eukaryotes and encodes a sequence- and structure-specific RNA-binding protein. The Vts1 protein has been implicated in post-transcriptional regulation of a specific set of mRNAs that contains its-binding site at their 3'-untranslated region. In this study, we identified VTS1 as a multi-copy suppressor of dna2-K1080E, a lethal mutant allele of DNA2 that lacks DNA helicase activity. The suppression was allele-specific, since overexpression of Vts1 did not suppress the temperature-dependent growth defects of dna2 delta 405N devoid of the N-terminal 405-amino-acid residues. Purified recombinant Vts1 stimulated the endonuclease activity of wild-type Dna2, but not the endonuclease activity of Dna2 delta 405N, indicating that the activation requires the N-terminal domain of Dna2. Stimulation of Dna2 endonuclease activity by Vts1 appeared to be the direct cause of suppression, since the multi-copy expression of Dna2-K1080E suppressed the lethality observed with its single-copy expression. We found that vts1 delta dna2 delta 405N and vts1 delta dna2-7 double mutant cells displayed synergistic growth defects, in support of a functional interaction between two genes. Our results provide both in vivo and in vitro evidence that Vts1 is involved in lagging strand synthesis by modulating the Dna2 endonuclease activity that plays an essential role in Okazaki fragment processing.