Homing endonucleases recognize long DNA sequences and generate site-specific DNA double-stranded breaks. They can serve as a powerful genomic modification tool in various industrial and biomedical applications. Here, we describe a two-plasmid bacterial selection system for characterization and engineering of homing endonucleases. This selection system couples the DNA cleavage activity of a homing endonuclease with the survival of host cells. Therefore, it can be used for assaying in vivo activity of homing endonucleases. Moreover, due to its high sensitivity, it can be applied for directed evolution of homing endonucleases with altered sequence specificity.