Three hereditary human disorders, Werner's syndrome, Bloom's syndrome and a subset of Rothmund-Thomson syndrome, are associated with the loss of function of the respective RecQ homologues BLM, WRN, and RTS. These RecQ homologues are composed of a conserved helicase domain flanking G and N-terminal domains. In contrast to BLM, WRN, and RTS, another RecQ homologue, RECQ5, possesses only short N-terminal region preceding the helicase domain and a long unique C-terminal domain. Although no disease has yet been genetically linked to a mutation in RECQ5, the prominent roles of RecQ helicase in the maintenance of genome stability suggest that RECQ5 helicase is likely to be important in vivo. To acquire a better understanding of RECQ5 function, we investigated protein interaction with the C-terminal domain of Drosophila melanogaster RECQ5/QE. A portion of Drosophila melanogaster retrotransposon mdg3, which corresponds to a nucleocapsid protein (gag-NC), was identified by use of the yeast two-hybrid system as interacting specifically with it. Glutathione S-transferase (GST) pull down experiments indicated that the mdg3 gag-NC bound mainly to an acidic region in the C-terminal domain of RECQ5/ QE, which is adjacent to the RecQ helicase domain. The helicase activity of RECQ5/QE was stimulated by mdg3 gag-NC protein in vitro. These data suggest that RECQ5/QE helicase interacts physically and functionally with mdg3 gag-NC through the acidic region and that RecQ homologue might be involved in retrotransposition and genomic stability.