The bacterial 2.1 kb insertion sequence IS21 occurs as a tandem repeat [=(IS21)2] on the broad host range plasmid R68.45. In (IS21)2, the two IS21 elements are separated by 3 bp termed junction sequence. Plasmids carrying (IS21)2 form cointegrates with other replicons at high frequencies. The two IS21 genes, istA and istB, were found to be necessary for cointegrate formation in vivo. Since the outer ends of (IS21)2 are dispensable for cointegrate formation, we favor a transposition model according to which a plasmid carrying (IS21)2 is cleaved at the junction sequence; the opened plasmid is then inserted into a target replicon. Here we show that Escherichia coli cell extracts, which contained over‐produced IstA protein, nicked a supercoiled (IS21)2 plasmid precisely at the inner 3′ termini of IS21; the resulting staggered cut generated 5′ protrusions. The istA gene, but not the istB gene, was required for in vitro cleavage of an IS21‐IS21 junction. Because of this cleavage and our previous findings (generation of 4 bp target duplications and loss of the junction sequence after cointegrate formation in vivo) we propose that plasmids with (IS21)2 produce cointegrates by a mechanism which involves joining of the inner 3′ ends of IS21 to the 5′ ends of the target.