Mismatch repair contributes to genetic stability, and inactivation of the mammalian pathway leads to tumor development. Mismatch correction occurs by an excision-repair mechanism and has been shown to depend on the 5' to 3' hydrolytic activity exonuclease 1 (Exo1) in eukaryotic cells. However, genetic and biochemical studies have indicated that one or more Exo1-independent modes of mismatch repair also exist. We have analyzed repair of nicked circular heteroduplex DNA in extracts of Exo1-deficient mouse embryo fibroblast cells. Exo1-independent repair under these conditions is MutL alpha-dependent and requires functional integrity of the MutL alpha endonuclease metal-binding motif. In contrast to the Exo1-dependent reaction, we have been unable to detect a gapped excision intermediate in Exo1-deficient extracts when repair DNA synthesis is blocked. A possible explanation for this finding has been provided by analysis of a purified system comprised of MutS alpha, MutL alpha, replication factor C, proliferating cell nuclear antigen, replication protein A, and DNA polymerase delta that supports Exo1-independent repair in vitro. Repair in this system depends on MutL alpha incision of the nicked heteroduplex strand and dNTP-dependent synthesis-driven displacement of a DNA segment spanning the mismatch. Such a mechanism may account, at least in part, for the Exo1-independent repair that occurs in eukaryotic cells, and hence the modest cancer predisposition of Exo1-deficient mammalian cells.