Vegetative cells of the filamentous ascomycete Neurospora tetrasperma are typically heterokaryotic, possessing haploid nuclei of both A and a mating types. As a consequence, N. tetrasperma is self-fertile. This life cycle, referred to as pseudohomothallism, clearly derives from true heterothallism of the type exhibited by related species such as N. crassa. Occasional homokaryotic, single-mating-type (heterothallic) isolates occur; in the laboratory, such strains can be outcrossed. The potential for outcrossing in N. tetrasperma raises the question of how this organism avoids heterokaryon incompatibility. Heterokaryon incompatability in vegetatively growing fungi is controlled by multiple loci. Two strains must be identical at each het locus (11 in N. crassa) to form a stable heterokaryon. Prior to the present survey, it seemed plausible that N. tetrasperma avoids heterokaryon incompatibility by maintaining compatible allele combinations through continual selfing. A survey of het-c variation among wild-type isolates in this study demonstrated that N. tetrasperma outcrosses in nature and that such matings can result in incompatible combinations of het-c alleles. Whereas individual wild-type isolates are invariably homoallelic for het-c, closely related strains may possess functionally different het-c alleles, which predate the origin of N. tetrasperma. Therefore, pseudohomothallic ascomycetes such as N. tetrasperma face an apparent evolutionary dilemma: the benefits of outcrossing must be balanced against the fact that matings can produce unstable heterokaryons and disrupt the pseudohomothallic life cycle.