we are analyzing activity of an endolysin which has N-terminal domain involved in antibacterial activity. The recombinant protein is not showing activity, and we are wondering that whether His-tag can interfere with its activity, keeping in view the fact that it is also attached at N-terminal of the protein
It's certainly a possibility. You could try changing the construct to put the His-tag at the C-terminus. You could also use a cleavable tag construct so that the His-tag can be removed after purification. It's also possible that the recombinant protein is not correctly folded.
Try C-terminal His-tag or introduce a protease cleavage site between the His-tag and N-terminus of your recombinant protein.
You could use another affinity matrix domain, like maltose, instead of His-tagging.
The His-tagged residues may be chelating the metal ion cofactors required for endolysin activity.
The short answer is yes, you may be masking an important part of your protein. Moving the tag to the other end may restore the functionality.
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