To study targeted recombination, a single linear 2-kb fragment of LEU2 DNA was liberated from a chromosomal site within the nucleus of Saccharomyces cerevisiae, by expression of the site-specific HO endonuclease. Gene targeting was scored by gene conversion of a chromosomal leu2 mutant allele by the liberated LEU2 fragment. This occurred at a frequency of only 2 ؋ 10 ؊4 , despite the fact that nearly all cells successfully repaired, by single-strand annealing, the chromosome break created by liberating the fragment. The frequency of Leu ؉ recombinants was 6-to 25-fold higher in pms1 strains lacking mismatch repair. In 70% of these cases, the colony was sectored for Leu ؉ ͞Leu ؊ . Similar results were obtained when a 4.1-kb fragment containing adjacent LEU2 and ADE1 genes was liberated, to convert adjacent leu2 and ade1 mutations on the chromosome. These results suggest that a linear fragment is not assimilated into the recipient chromosome by two crossovers each close to the end of the fragment; rather, heteroduplex DNA between the fragment and the chromosome is apparently formed over the entire region, by the assimilation of one of the two strands of the linear duplex DNA. Moreover, the recovery of Leu ؉ transformants is frequently defeated by the cell's mismatch repair machinery; more than 85% of mismatches in heteroduplex DNA are corrected in favor of the resident, unbroken (mutant) strand.Despite the fact that Saccharomyces is celebrated for its ability to carry out homologous recombination, the frequency of gene replacement by transformation of a linear exogenous DNA is surprisingly low (1-3). This could be due to several factors. For example, ''naked'' DNA, not yet associated with histones or other nuclear proteins, might be rapidly degraded before it has a chance to undergo recombination. Alternatively, the replacement of homologous DNA sequences may be an inherently inefficient process. Previously we showed that the frequency of gene replacement can be increased by providing additional copies of the target sequence (3), a result that suggests that the search for homology is a rate-limiting step in the process. In these and previous experiments it was also not known if there was a special subpopulation of cells that were especially adept at this process, either because they were more proficient in recombination or because they were able to take up more copies of the transforming DNA.To avoid some of the uncertainties inherent in transformation, we have devised a way to liberate a single linearized fragment of DNA from a chromosome within the nucleus and to examine its capacity to be ''captured'' by homologous recombination. The chromosomal region illustrated in Fig. 1A contains a LEU2 gene flanked by HO endonuclease recognition sites. When a galactose-inducible HO endonuclease is expressed, cleavage occurs at these sites, liberating a 2.0-kb LEU2 fragment and leaving a broken chromosome. The chromosomal break itself can be very efficiently repaired by the process of single-strand annealing (4-6), ...