Genetic instability can be induced by unusual DNA structures and sequence repeats. We have previously demonstrated that a large palindrome in the mouse germ line derived from transgene integration is extremely unstable and undergoes stabilizing rearrangements at high frequency, often through deletions that produce asymmetry. We have now characterized other palindrome rearrangements that arise from complex homologous recombination events. The structure of the recombinants is consistent with homologous recombination occurring by a noncrossover gene conversion mechanism in which a break induced in the palindrome promotes homologous strand invasion and repair synthesis, similar to mitotic break repair events reported in mammalian cells. Some of the homologous recombination events led to expansion in the size of the palindromic locus, which in the extreme case more than doubled the number of repeats. These results may have implications for instability observed at naturally occurring palindromic or quasipalindromic sequences.