T4 polynucleotide kinase–phosphatase (Pnkp) exemplifies a family of enzymes with 5′-kinase and 3′-phosphatase activities that function in nucleic acid repair. The polynucleotide 3′-phosphatase reaction is executed by the Pnkp C-terminal domain, which belongs to the DxDxT acylphosphatase superfamily. The 3′-phosphatase reaction entails formation and hydrolysis of a covalent enzyme-(Asp165)-phosphate intermediate, driven by general acid–base catalyst Asp167. We report that Pnkp also has RNA 2′-phosphatase activity that requires Asp165 and Asp167. The physiological substrate for Pnkp phosphatase is an RNA 2′,3′-cyclic phosphate end (RNA > p), but the pathway of cyclic phosphate removal and its enzymic requirements are undefined. Here we find that Pnkp reactivity with RNA > p requires Asp165, but not Asp167. Whereas wild-type Pnkp transforms RNA > p to RNA_OH, mutant D167N converts RNA > p to RNA 3′-phosphate, which it sequesters in the phosphatase active site. In support of the intermediacy of an RNA phosphomonoester, the reaction of mutant S211A with RNA > p results in transient accumulation of RNAp en route to RNA_OH. Our results suggest that healing of 2′,3′-cyclic phosphate ends is a four-step processive reaction: RNA > p + Pnkp → RNA-(3′-phosphoaspartyl)-Pnkp → RNA_3′p + Pnkp → RNA_OH + phosphoaspartyl-Pnkp → P_i + Pnkp.