The hybrid plasmid pJS37 is composed of the streptococcal plasmid pLS1, which confers tetracycline resistance, and the staphylococcal plasmid pC194, which confers chloramphenicol resistance. When gram-positive bacteria containing pJS37 were grown in the presence of chloramphenicol, four different deleted derivatives accumulated. The deletions in the plasmid enhanced resistance to chloramphenicol by placing the cat gene of pC194 near promoters of pLS1. All four deletions shared a common endpoint that corresponded to the putative target site for DNA strand nicking by the pC194 replication protein, RepH. At the other, variable endpoint, the DNA sequence was similar to the putative RepH target sequence. Alteration of the RepH protein, by in vitro modification of the gene encoding it, eliminated this class of deletions. By extending a previously proposed model for the generation of a different but related class of deletions (B. Michel and S.D. Ehrlich, EMBO J. 5:3691-3696, 1986), a comprehensive model that could generate both classes of deletions is suggested. It proposes that a nicking-closing activity of the plasmid replication protein at its normal target site and, aberrantly, at sites with similar sequence can generate deletions either proximal or distal to the aberrant site during rolling-circle replication of the plasmid.