We have generated a site-directed transgenic (sd-tg) mouse model in which the JH locus has been replaced with a rearranged VDJ coding for the heavy chain of an anti-DNA antibody. In these mice, B cells expressing the anti-dsDNA specificity are negatively regulated. We observe a novel mechanism for B cell tolerance, receptor editing at the heavy chain locus. In most sd-tg B cells, the inserted anti-DNA VH gene has been replaced by the upstream endogenous VH, or DH, or both genes through recombination with the heptamer embedded at the 3' end of most VH genes. Three types of recombination events have been identified. VH-to-VDJ, DH-to-VDJ, and VH-to-DH-VDJ. Analysis of the junctional sequences revealed features of classical V(D)J rearrangement, namely N sequence addition and nucleotide deletion. A conserved nonamer was found 12 bp upstream of the embedded heptamer. This nonamer may represent a novel recombination signal sequence used for VH editing. The sd-tg model thus provides direct evidence for secondary rearrangement at VH-D-JH. This process may play a role in tolerance by editing autoreactive receptors and may also serve to diversify the VH repertoire.