The induction of recombination by transcription activation has been documented in prokaryotes and eukaryotes. Unwinding of the DNA duplex, disruption of chromatin structure or changes in local supercoiling associated with transcription can be indirectly responsible for the stimulation of recombination. Here we provide genetic and molecular evidence for a specific mechanism of stimulation of recombination by transcription. We show that the induction of deletions between repeats in hpr1delta cells of Saccharomyces cerevisiae is linked to transcription elongation. Molecular analysis of different direct repeat constructs reveals that deletions induced by hpr1delta are specific for repeat constructs in which transcription initiating at an external promoter traverses particular regions of the DNA flanked by the repeats. Transcription becomes HPR1 dependent when elongating through such regions. Both the induction of deletions and the HPR1 dependence of transcription were abolished when a strong terminator was used to prevent transcription from proceeding through the DNA region flanked by the repeats. In contrast to previously reported cases of transcription-induced recombination, there was no correlation between high levels of transcripts and high levels of recombination. Our study provides evidence that direct repeat recombination can be induced by transcriptional elongation.