DNA double-strand break (DSB) repair in yeast is effected primarily by gene conversion. Conversion can conceivably result from gap repair or from mismatch repair of heteroduplex DNA (hDNA) in recombination intermediates. Mismatch repair is normally very efficient, but unrepaired mismatches segregate in the next cell division, producing sectored colonies. Conversion of small heterologies (single-base differences or insertions <15 bp) in meiosis and mitosis involves mismatch repair of hDNA. The repair of larger loop mismatches in plasmid substrates or arising by replication slippage is inefficient and/or independent of Pms1p/Msh2p-dependent mismatch repair. However, large insertions convert readily (without sectoring) during meiotic recombination, raising the question of whether large insertions convert by repair of large loop mismatches or by gap repair. We show that insertions of 2.2 and 2.6 kbp convert efficiently during DSB-induced mitotic recombination, primarily by Msh2p- and Pms1p-dependent repair of large loop mismatches. These results support models in which Rad51p readily incorporates large heterologies into hDNA. We also show that large heterologies convert more frequently than small heterologies located the same distance from an initiating DSB and propose that this reflects Msh2-independent large loop-specific mismatch repair biased toward loop loss.