Six copies of insertion elements accumulate in the subtelomeric region immediately proximal to the telomeric repeats on Chlorella chromosome I. The elements, designated Zepps, bear the characteristic features of non-viral (LINE-like) retrotransposons, including a poly(A) tail, 5'-truncations, a retroviral reverse transcriptase-like ORF and flanking target duplications. Detailed sequence analysis of the Chlorella subtelomeric region revealed a novel mechanism of Zepp transposition; successive insertions of each Zepp element into another Zepp as a target, leaving a tandem array of their 3'-regions with poly(A) tracts facing toward the centromere. Only the most distal Zepp copy was inverted to connect its poly(A) tail with the telomeric repeats. A similar Zepp cluster but without the telomeric repeats was also found at the terminus of another Chlorella chromosome. These structures contrast with that proposed for the addition of HeT-A and TART elements to Drosophila telomeres. Expression of Zepp elements is induced by heat shock treatment. Possible roles of the subtelomeric retrotransposons in formation and maintenance of telomeres are discussed.