Sweet potato chlorotic stunt virus (SPCSV; genus Crinivirus, family Closteroviridae) causes heavy yield losses in sweet potato plants co-infected with other viruses. The dsRNA-specific class 1 RNase III-like endoribonuclease (RNase3) encoded by SPCSV suppresses post-transcriptional gene silencing and eliminates antiviral defence in sweet potato plants in an endoribonuclease activity-dependent manner. RNase3 can cleave long dsRNA molecules, synthetic small interfering RNAs (siRNAs), and plant- and virus-derived siRNAs extracted from sweet potato plants. In this study, conditions for efficient expression and purification of enzymically active recombinant RNase3 were established. Similar to bacterial class 1 RNase III enzymes, RNase3-Ala (a dsRNA cleavage-deficient mutant) bound to and processed double-stranded siRNA (ds-siRNA) as a dimer. The results support the classification of SPCSV RNase3 as a class 1 RNase III enzyme. There is little information about the specificity of RNase III enzymes on small dsRNAs. In vitro assays indicated that ds-siRNAs and microRNAs (miRNAs) with a regular A-form conformation were cleaved by RNase3, but asymmetrical bulges, extensive mismatches and 2'-O-methylation of ds-siRNA and miRNA interfered with processing. Whereas Mg(2+) was the cation that best supported the catalytic activity of RNase3, binding of 21 nt small dsRNA molecules was most efficient in the presence of Mn(2+). Processing of long dsRNA by RNase3 was efficient at pH 7.5 and 8.5, whereas ds-siRNA was processed more efficiently at pH 8.5. The results revealed factors that influence binding and processing of small dsRNA substrates by class 1 RNase III in vitro or make them unsuitable for processing by the enzyme.