Cell extracts from murine A9 or human HeLa cells containing wild-type copies the NS1 polypeptide of minute virus of mice (MVM), produced from a recombinant vaccinia virus, can support the resolution of viral 3' termini from palindromic junction fragments of dimeric, replicative-form MVM DNA. Resolution resulted in the generation of two new viral termini, one associated with each arm of the junction palindrome. Telomeres were created in two configurations, "extended" forms, which were covalently associated with NS1 molecules, and smaller "turn-around" forms in which a single arm of the palindrome terminated at the axis of dyad symmetry in a covalent bond which cross-linked the two strands. The in vitro resolution reaction was asymmetric, generating predominantly extended-form termini from one arm of the palindrome but predominantly turn-around forms from the other. This asymmetry was independent of the type of cell used to prepare the in vitro extract or the orientation of the palindrome in the plasmid and was obtained for all cloned junction sequences of 156 bp or more. Two modified forms of the duplex junction fragment, which appeared to be intermediates in the resolution process since they were nicked, covalently linked to NS1, and associated with newly synthesized DNA, were identified. The structures of these intermediates suggest that resolution is initiated by preferential nicking at one of the two candidate resolution sites. The asymmetric nature of this resolution reaction is discussed in terms of current models of MVM DNA replication.