The three-dimensional structure of Escherichia coli DNA photolyase and molecular dynamics simulations using the AMBER force field were used to construct a model of the enzyme-substrate complex. Three different dinucleotides with cyclobutane pyrimidine dimers (T >$($) over bar T, T >$($) over bar U, and U >$($) over bar T), two conformations of a single-stranded DNA nonamer, and a duplex DNA dodecamer containing the T >$($) over bar T lesion were studied. The results are in good agreement with available experimental data and provide a structural rationalization for the results of ethylation studies, the measurement of the relative rates of electron transfer for different dinucleotides complexed to the enzyme, and the similar binding constants for T >$($) over bar T containing single stranded and duplex DNA. The results support the base-flipping mechanism suggested earlier. The proposed active-site model reveals three types of interactions: (i) ion-pair interactions at the rim of the active site between the positively charged residues on the enzyme surface (Arg(226), Arg(342), Arg(397), and Lys(154)) and the deoxyribophosphate immediately 5' to the dimer as well as the three deoxyribophosphates on the 3' side, (ii) polar interactions between Glu(274) and the NH function of the 3' base of the dimer as well as a hydrogen bond between the C-4 carbonyl on the 5' base of the dimer with Trp(384), and (iii) hydrophobic interactions between Trp(277) and Trp(384) and the nonpolar cyclobutane moiety of the dimer, thus shielding the radical anion intermediate of the DNA repair from electrophilic attack. In this model, the distance between the redox active FADH cofactor and the dimer is too large to account for the observed rates of electron transfer. Rather, the results suggest an electron transfer mediated by the pi-systems of the aromatic residues Trp(277) and Trp(384).