AP endonuclease recognizes sites in DNA where a base is missing, known as AP sites. These sites can occur due to spontaneous depurination or the action of DNA glycosylases. The enzyme cleaves the phosphodiester bond at the 5' end of the AP site, creating a single-strand break with a 3'-hydroxyl group and a 5'-deoxyribose phosphate. This cleavage is essential for the subsequent steps of DNA repair, where the damaged region is removed and replaced with the correct nucleotides.