The mechanism by which double-strand cleavages stimulate the joining of plasmid DNA fragments introduced into cultured mammalian cells was investigated by cotransfecting pairs of plasmids encoding deletion mutations in a dominant selectable gene into LMtk- cells. Plasmid recombination substrates were produced by creating deletions of different sizes within the neo coding region of the pSV2neo plasmid. Complementing pairs of deleted plasmid DNAs were linearized at specific unique sites before cotransfection into mouse LMtk- cells by the calcium phosphate precipitation method. Cleaving one donor plasmid produced a 4- to 10-fold stimulation in the production of colonies able to survive in medium containing G-418. The linearization of the second plasmid further increased the efficiency by another factor of 6 to 15 when the cut was made on the opposite side of the homology, approximately equidistant from the center of the overlap. Fifty-seven individual G-418-resistant colonies representing the products of individual crosses were isolated, and the genomic DNAs containing the presumably integrated, functional recombinant neo genes were analyzed on Southern blots. A band consistent with the exchange of markers flanking the neo gene was present in 90% of the DNAs examined. In only one case was the pattern indicative of either a double crossover or a gene conversion event. These results support the idea that homologous extrachromosomal DNA fragments are joined through annealing of overlapping single-stranded ends. This DNA-joining phenomenon may represent the activity of cellular DNA repair enzymes; its relationship to genetic recombination occurring at the chromosomal level remains to be determined.