The exonucleolytic degradation of high-density labeled DNA by exonuclease III was monitored using two-color fluorescence correlation spectroscopy (FCS). One strand of the double stranded template DNA was labeled on either one or two base types and additionally at one end via a 5′ Cy5 tagged primer. Exonucleolytic degradation was followed via the diffusion time, the brightness of the remaining DNA as well as the concentration of released labeled bases. We found a hydrolyzation rate of about 11 to 17 nucleotides per minute per enzyme (nt/min/enzyme) for high-density labeled DNA, which is by a factor of about 4 slower than for unlabeled DNA. The exonucleolytic degradation of a 488 base pair long double stranded DNA resulted in a short double stranded DNA segment of 112 ± 40 base pairs (bp) length with two single-stranded tails.