A yeast artificial chromosome (YAC) was constructed with a native autonomous replicating sequence (ARS) flanked telomere at one end and a 50-bp synthetic oligonucleotide of C4A2 repeats at the other. This was done in order to determine whether the presence of the flanking ARS sequence is required for telomere function. This construct was introduced into two different yeast strains: one mutated in the recombination function RAD52 and the other wild type for this gene. Both strains gave rise to autonomously replicating artificial chromosomes. The molecules in the RAD52 strain were rearranged dimers terminating at both ends with Tetrahymena telomeres, whereas in the rad52 strain two classes of YACs were found: rearranged dimers and elements bearing an ARS-free telomere. The presence of the latter class of molecules confirmed the finding of Wellinger and Zakian (1989, Proc. Natl. Acad. Sci. USA 86, 973-977) that the flanking ARS is not required for telomere function. Furthermore, in this class of molecules the ARS-free telomeric end was shortened as a result of deletions that removed some distal pBR322 sequences and some C4A2 repeats. The size of the resulting YACs ranged from 7.7 to 9 kb, considerably below the size threshold found by Zakian et al. (1986, Mol. Cell. Biol. 6, 925-932) for CEN4 artificial plasmids. An explanation for the structural instability of the ARS-free end of the YACs is suggested.