Congenital Dyserythropoietic Anaemia type I (CDA-I) is a rare inherited disorder of erythropoiesis, in which erythroid cells display a unique nuclear phenotype referred to as 'spongy' heterochromatin. The molecular basis of CDA-I remains unknown, with most cases of CDA-I caused by mutations in CDAN1, encoding Codanin-1, or CDIN1, encoding for Codanin-1-interacting nuclease 1 (CDIN1). To date, very little is known about the function of CDA-I disease proteins and the mechanism by which their associated mutations cause disease. Here, we demonstrate that endogenous CDIN1 interacts with Codanin-1, to form a stable complex. Structural and functional analysis of this complex reveals that the CDIN1-Codanin-1 complex is an RNA nuclease. We shed light on the key mechanistic features of the complex using biochemical and biophysical approaches, complemented by all-atom molecular dynamics (MD) structural simulations. We identify various functional consequences of founder patient mutations on the RNA nuclease activity of CDIN1, providing a framework for understanding the pathophysiology and developing therapeutic strategies for CDA-I.