The Borrelia telomere resolvase, ResT, forms the unusual hairpin telomeres of the linear Borrelia replicons in a process referred to as telomere resolution. Telomere resolution is a DNA cleavage and rejoining reaction that proceeds from a replicated telomere intermediate in a reaction with mechanistic similarities to that catalyzed by type IB topoisomerases. Previous reports have implicated the hairpin-binding module, at the end of the N-terminal domain of ResT, in distorting the DNA between the scissile phosphates so as to promote DNA cleavage and hairpin formation by the catalytic domain. We report that unwinding the DNA between the scissile phosphates, prior to DNA cleavage, is a key cold-sensitive step in telomere resolution. Through the analysis of ResT mutants, rescued by substrate modifications that mimic DNA unwinding between the cleavage sites, we show that formation and/or stabilization of an underwound pre-cleavage intermediate depends upon cooperation of the hairpin-binding module and catalytic domain. The phenotype of the mutants argues that the pre-cleavage intermediate promotes strand ejection to favor the forward reaction and that subsequent hairpin capture is a reversible reaction step. These reaction features are proposed to promote hairpin formation over strand resealing while allowing reversal back to substrate of aborted reactions.