A functional methyl-directed mismatch repair pathway in Escherichia coli prevents the formation of deletions between 101-bp tandem repeats with 4% sequence divergence. Deletions between perfectly homologous repeats are unaffected. Deletion in both cases occurs independently of the homologous recombination gene, recA. Because the methyl-directed mismatch repair pathway detects and excises one strand of a mispaired duplex, an intermediate for RecA-independent deletion of tandem repeats must therefore be a heteroduplex formed between strands of each repeat. We find that MutH endonuclease, which in vivo incises specifically the newly replicated strand of DNA, and the Dam methylase, the source of this strand-discrimination, are required absolutely for the exclusion of "homeologous" (imperfectly homologous) tandem deletion. This supports the idea that the heteroduplex intermediate for deletion occurs during or shortly after DNA replication in the context of hemi-methylation. Our findings confirm a "replication slippage" model for deletion formation whereby the displacement and misalignment of the nascent strand relative to the repeated sequence in the template strand accomplishes the deletion.