Inverted DNA repeats are an at-risk motif for genetic instability that can induce both deletions and recombination in yeast. We investigated the role of the length of inverted repeats and size of the DNA separating the repeats for deletion and recombination. Stimulation of both deletion and recombination was directly related to the size of inverted repeats and inversely related to the size of intervening spacers. A perfect palindrome, formed by two 1.0-kb URA3-inverted repeats, increased intra- and interchromosomal recombination in the adjacent region 2,400-fold and 17,000-fold, respectively. The presence of a strong origin of replication in the spacer reduced both rates of deletion and recombination. These results support a model in which the stimulation of deletion and recombination by inverted repeats is initiated by a secondary structure formed between single-stranded DNA of inverted repeats during replication.