We have developed a system for analyzing recombination between a DNA fragment released in the nucleus from a single-copy plasmid and a genomic target in order to determine the influence of DNA sequence mismatches on the frequency of gene replacement in Saccharomyces cerevisiae. Mismatching was shown to be a potent barrier to efficient gene replacement, but its effect was considerably ameliorated by the presence of DNA sequences that are identical to the genomic target at one end of a chimeric DNA fragment. Disruption of the mismatch repair gene MSH2 greatly reduces but does not eliminate the barrier to recombination between mismatched DNA fragment and genomic target sequences, indicating that the inhibition of gene replacement with mismatched sequences is at least partially under the control of mismatch repair. We also found that mismatched sequences inhibited recombination between a DNA fragment and the genome only when they were close to the edge of the fragment. Together these data indicate that while mismatches can destabilize the relationship between a DNA fragment and a genomic target sequence, they will only do so if they are likely to be in the heteroduplex formed between the recombining molecules.DNA sequences engineered in vitro can be readily introduced into the genome of Saccharomyces cerevisiae cells by homologous recombination, facilitating the creation of duplications, insertions, and deletions of anything from single genes to large chromosomal fragments (33,38). In contrast, early experiments with mammalian cells showed that recombinant DNA molecules are most often inserted randomly into the genome by a mechanism that does not require extensive identity between the DNA fragment and the genomic sequences (32,40,47). More recently, it was shown that the efficiency of homologous gene replacement in mammalian cells can be greatly enhanced relative to random integration by using DNA sequences from a source that is isogenic to the recipient cells, suggesting that the presence of mismatches between the DNA fragment and the genome strongly inhibits homologous recombination (10, 45).DNA sequence mismatching presents a considerable barrier to homologous recombination in a wide variety of systems (5, 9, 10, 14, 21, 31, 34-36, 41, 45, 49, 50). Several laboratories have observed that defects in the mismatch repair machinery in bacterial species greatly lower the barrier against recombination between mismatched sequences (12,18,25,29,36,54). Other investigators have shown that mutations in mismatch repair genes in yeast (9, 34) and mammal (11) cells similarly reduce the inhibitory effect of mismatches, indicating that this genetic mechanism is evolutionarily conserved. It has been suggested that nonidentical sequences are prevented from recombining because the mispairing that occurs when heteroduplex DNA is formed is recognized by the mismatch repair machinery, after which the heteroduplex is unwound (9) or multiply nicked (27). The mismatch repair machinery in yeast corrects mismatches in the heteroduplex fo...