Transposons have contributed protein coding sequences to a unexpectedly large number of human genes. Except for the V(D)J recombinase and telomerase, all remain of unknown function. Here we investigate the activity of the human SETMAR protein, a highly expressed fusion between a histone H3 methylase and a mariner family transposase. Although SETMAR has demonstrated methylase activity and a DNA repair phenotype, its mode of action and the role of the transposase domain remain obscure. As a starting point to address this problem, we have dissected the activity of the transposase domain in the context of the full-length protein and the isolated transposase domain. Complete transposition of an engineered Hsmar1 transposon by the transposase domain was detected, although the extent of the reaction was limited by a severe defect for cleavage at the 3′ ends of the element. Despite this problem, SETMAR retains robust activity for the other stages of the Hsmar1 transposition reaction, namely, site-specific DNA binding to the transposon ends, assembly of a paired-ends complex, cleavage of the 5′ end of the element in Mn²⁺, and integration at a TA dinucleotide target site. SETMAR is unlikely to catalyze transposition in the human genome, although the nicking activity may have a role in the DNA repair phenotype. The key activity for the mariner domain is therefore the robust DNA-binding and looping activity which has a high potential for targeting the histone methylase domain to the many thousands of specific binding sites in the human genome provided by copies of the Hsmar1 transposon.