Inverted DNA repeats are known to cause genomic instabilities. Here we demonstrate that double-strand DNA breaks (DSBs) introduced a large distance from inverted repeats in the yeast (Saccharomyces cerevisiae) chromosome lead to a burst of genomic instability. Inverted repeats located as far as 21 kb from each other caused chromosome rearrangements in response to a single DSB. We demonstrate that the DSB initiates a pairing interaction between inverted repeats, resulting in the formation of large dicentric inverted dimers. Furthermore, we observed that propagation of cells containing inverted dimers led to gross chromosomal rearrangements, including translocations, truncations, and amplifications. Finally, our data suggest that break-induced replication is responsible for the formation of translocations resulting from anaphase breakage of inverted dimers. We propose a model explaining the formation of inverted dicentric dimers by intermolecular single-strand annealing (SSA) between inverted DNA repeats. According to this model, anaphase breakage of inverted dicentric dimers leads to gross chromosomal rearrangements (GCR). This "SSA-GCR" pathway is likely to be important in the repair of isochromatid breaks resulting from collapsed replication forks, certain types of radiation, or telomere aberrations that mimic isochromatid breaks.