That closely related species often differ by chromosomal inversions was discovered by Sturtevant and Plunkett in 1926. Our knowledge of how these inversions originate is still very limited, although a prevailing view is that they are facilitated by ectopic recombination events between inverted repetitive sequences. The availability of genome sequences of related species now allows us to study in detail the mechanisms that generate interspecific inversions. We have analyzed the breakpoint regions of the 29 inversions that differentiate the chromosomes of Drosophila melanogaster and two closely related species, D. simulans and D. yakuba, and reconstructed the molecular events that underlie their origin. Experimental and computational analysis revealed that the breakpoint regions of 59% of the inversions (17/29) are associated with inverted duplications of genes or other nonrepetitive sequences. In only two cases do we find evidence for inverted repetitive sequences in inversion breakpoints. We propose that the presence of inverted duplications associated with inversion breakpoint regions is the result of staggered breaks, either isochromatid or chromatid, and that this, rather than ectopic exchange between inverted repetitive sequences, is the prevalent mechanism for the generation of inversions in the melanogaster species group. Outgroup analysis also revealed evidence for widespread breakpoint recycling. Lastly, we have found that expression domains in D. melanogaster may be disrupted in D. yakuba, bringing into question their potential adaptive significance.