We have developed novel self-inactivating and self-activating retroviral vectors based on the previously observed high-frequency deletion of direct repeats. We constructed spleen necrosis virus (SNV)-based viral vectors that contained large direct repeats flanking the viral encapsidation sequence (E). A large proportion of the proviruses in the target cells had E and one copy of the direct repeat deleted. Direct repeats of 1,333 and 788 bp were deleted at frequencies of 93 and 85%, respectively. To achieve a 100% deletion efficiency in target cells after ex vivo infection and drug selection, we constructed a self-activating vector that simultaneously deleted E and reconstituted the neomycin phosphotransferase gene. Selection of the target cells for resistance to G418 (a neomycin analog) ensured that all integrated proviruses had E deleted. The proviruses with E deleted were mobilized by a replication-competent virus 267,000-fold less efficiently than proviruses with E. We named these self-inactivating vectors E- (E-minus) vectors. These vectors should increase the safety of retroviral vector-mediated gene therapy by preventing the spread of vector sequences to nontarget cells in the event of coinfection with helper virus. We propose that direct-repeat deletions occur during RNA-dependent DNA synthesis and suggest that template switches occur without a requirement for RNA breaks. The minimum template dissociation frequency was estimated as 8%/100 bp per replication cycle. These vectors demonstrate that large direct repeats and template-switching properties of reverse transcriptase can be utilized to delete any sequence or reconstitute genes during retroviral replication.