Chickens create a repertoire for their immunoglobulin light-chain gene by a novel process of sequence substitution within a unique rearranged V gene segment (VL1) during B-cell development in the bursa of Fabricius. Sequence analysis has shown that these nucleotide substitutions are not random. Potential donors for observed sequence substitutions are present within the 25 psi VL segments located 5' of the VL1 gene. In this report, we demonstrate that VL1 sequence substitutions: (1) are derived from the psi VL donor segment templates in cis, (2) do not result in reciprocal transfer of VL1 gene sequences to the psi VL segments, and (3) lead to the rapid disappearance of cells with nondiversified rearranged VL1 genes during B-cell development in the bursa of Fabricius. Together, these data provide evidence that VL1 sequence diversity arises as a result of intrachromosomal gene conversion.