We examined the mechanism by which recombination between imperfectly matched sequences (homeologous recombination) is suppressed in mammalian chromosomes. DNA substrates were constructed, each containing a thymidine kinase (tk) gene disrupted by insertion of an XhoI linker and referred to as a "recipient" gene. Each substrate also contained one of several "donor" tk sequences that could potentially correct the recipient gene via recombination. Each donor sequence either was perfectly homologous to the recipient gene or contained homeologous sequence sharing only 80% identity with the recipient gene. Mouse Ltk(-) fibroblasts were stably transfected with the various substrates and tk(+) segregants produced via intrachromosomal recombination were recovered. We observed exclusion of homeologous sequence from gene conversion tracts when homeologous sequence was positioned adjacent to homologous sequence in the donor but not when homeologous sequence was surrounded by homology in the donor. Our results support a model in which homeologous recombination in mammalian chromosomes is suppressed by a nondestructive dismantling of mismatched heteroduplex DNA (hDNA) intermediates. We suggest that mammalian cells do not dismantle mismatched hDNA by responding to mismatches in hDNA per se but rather rejection of mismatched hDNA appears to be driven by a requirement for localized homology for resolution of recombination.