In mammalian cells, the predominant pathway of chromosomal integration of exogenous DNA is random or illegitimate recombination; integration by homologous recombination is infrequent. Homologous recombination is initiated at double-strand DNA breaks which have been acted on by single-strand exonuclease. To further characterize the relationship between illegitimate and homologous recombination, we have investigated whether illegitimate recombination is also preceded by exonuclease digestion. Heteroduplex DNAs which included strand-specific restriction markers at each of four positions were generated. These DNAs were introduced into mouse embryonic stem cells, and stably transformed clones were isolated and analyzed to determine whether there was any strand bias in the retention of restriction markers with respect to their positions. Some of the mismatches appear to have been resolved by mismatch repair. Very significant strand bias was observed in the retention of restriction markers, and there was polarity of marker retention between adjacent positions. We conclude that DNA is frequently subjected to 533 exonuclease digestion prior to integration by illegitimate recombination and that the length of DNA removed by exonuclease digestion can be extensive. We also provide evidence which suggests that frequent but less extensive 335 exonuclease processing also occurs.Most DNA introduced into mammalian cells is lost; that which is stably maintained is usually retained by virtue of its integration into nonhomologous chromosomal DNA sites by so-called illegitimate recombination. If the exogenous DNA includes sequences which are homologous with chromosomal sequences, a small minority of cells which integrate DNA will do so by homologous recombination. The practical application of homologous recombination between exogenous DNA and a chromosomal target (gene targeting) is making an enormous impact on mouse molecular genetics (4, 5). Highly efficient gene targeting would provide the ideal form of gene therapy, allowing deleterious mutations to be corrected rather than merely compensating for them (42), but at present the efficiency of gene targeting is several orders of magnitude too low for this to be feasible. Improvements in the frequency of homologous recombination and reductions in the proportion of integration which occurs by illegitimate recombination would be required before homologous recombination could be used for gene therapy. For such improvements to be made, it will be important to understand the mechanisms of gene targeting and illegitimate recombination and the relationships between these processes.There have been numerous studies of the mechanism of homologous recombination in mammalian cells. In many cases, the recombination substrates were introduced into cells together; in these studies, homologous recombination occurs efficiently and prior to chromosomal integration (1,6,20). In contrast with gene targeting, such extrachromosomal homologous recombination is efficient. The mechanism of extrachromosomal h...