Oligonucleotides can be used to direct site-specific changes in genomic DNA through a process in which mismatched base pairs in the oligonucleotide and the target DNA are created. The mechanism by which these complexes are developed and resolved is being studied by using Saccharomyces cerevisiae as a model system. Genetic analyses have revealed that in all likelihood the reaction occurs in two phases: DNA pairing and DNA repair. While the former phase involves strand assimilation, the latter phase likely involves an endonucleolytic processing step that leads to joint resolution. In this study, we established the importance of a functioning MRE11 gene in the overall reaction, as yeast strains deficient in MRE11 exhibited severely reduced activity. The activity could be rescued by complementation with wild-type MRE11 genes but not with MRE11 alleles lacking the nuclease function. Taken together, the data suggest that Mre11 provides nuclease activity for targeted nucleotide exchange, a process that could be used to reengineer yeast genes.Genetic reengineering in lower eukaryotes holds promise for the creation of host strains that can produce useful metabolites or express desirable phenotypes. The majority of efforts in yeasts have focused on the development of knock-out strategies, where the aim is to completely disable the gene but in many cases the most desirable outcome is a (subtle) modulation of gene function. Thus, new approaches that are simple and straightforward and do not require multiple cloning steps must be developed to meet this goal. A direct approach centers around alteration of single bases at specific sites in chromosomal genes without the need for integration or extensive genetic rearrangement.Single-stranded DNA molecules can be used to direct the alteration or exchange of specific nucleotides in the genome of Saccharomyces cerevisiae. Pioneering work by Moerschell and colleagues (16) demonstrated the feasibility of base repair in the CYC1 gene, a gene encoding cytochrome c isoform 1. A variety of point and frameshift mutations within CYC1 were reversed by the transformation of single strands of DNA in approximately 0.0003 to 0.002% of the cells (28). The mechanism of conversion, however, was not fully elucidated in these studies, although the reaction was found to be dose dependent and exhibited an interesting strand bias. In a similar line of experiments, we have begun to examine the potential for using modified single-stranded DNA oligonucleotides (MSOs) to repair point and frameshift mutations in the yeast chromosome, and our long-term goal is to apply the technique to mammalian cells (22; see reference 2 for a review). To this end, we focused on examining the mechanism by which MSOs direct nucleotide alteration in yeast cells.