Genome mosaicism in temperate bacterial viruses (bacteriophages) is so great that it obscures their phylogeny at the genome level. However, the precise molecular processes underlying this mosaicism are unknown. Illegitimate recombination has been proposed, but homeologous recombination could also be at play. To test this, we have measured the efficiency of homeologous recombination between diverged oxa gene pairs inserted into lambda. High yields of recombinants between 22% diverged genes have been obtained when the virus Red Gam pathway was active, and 100 fold less when the host Escherichia coli RecABCD pathway was active. The recombination editing proteins, MutS and UvrD, showed only marginal effects on lambda recombination. Thus, escape from host editing contributes to the high proficiency of virus recombination. Moreover, our bioinformatics study suggests that homeologous recombination between similar lambdoid viruses has created part of their mosaicism. We therefore propose that the remarkable propensity of the lambda-encoded Red and Gam proteins to recombine diverged DNA is effectively contributing to mosaicism, and more generally, that a correlation may exist between virus genome mosaicism and the presence of Red/Gam-like systems.