Homologous integration of a foreign DNA segment into a chromosomal target sequence enables precise disruption or replacement of genes of interest and provides an effective means to analyze gene function. However, integration after transformation is predominantly nonhomologous in most species other than yeast. Here, we show that homologous integration in the filamentous fungus Neurospora requires the homologous-recombination proteins MEI-3 (yeast Rad51 homolog) and MUS-25 (yeast Rad54 homolog), whereas nonhomologous integration requires nonhomologous end-joining protein MUS-52 (yeast Ku80 homolog). Two additional minor integration pathways are present, one MEI-3-independent and homologous, the other MUS-52-independent and nonhomologous. Homologous and nonhomologous mechanisms compete when external DNA is integrated. In Neurospora, both nonhomologous integration pathways, MUS-52-dependent and MUS-52-independent, require MUS-53 (a homolog of human Lig4), which functions in the final step of nonhomologous end-joining. Because nonhomologous integration is eliminated in a LIG4-disrupted strain, integration occurs only at the targeted site in mus-53 mutants, making them an extremely efficient and safe host for gene targeting.