Chicken immunoglobulin variable region diversity is generated during B-cell development in the bursa of Fabricius by intrachromosomal gene conversion, resulting in the replacement of sequence blocks within the unique rearranged VL1 and VH1 genes with homologous sequences derived from V region pseudogene segments (psi V). In this report, the nucleotide sequences of 217 gene conversion events in 52 random IgL clones were analyzed to characterize the molecular mechanism of gene conversion. The frequency of psi VL usage as gene conversion donors is shown to depend on the proximity of the psi VL segment to VL1, extent of homology with VL1, and relative orientation of the psi VL segments. Gene conversion events are not observed in the 5' region of homology between psi VL segments and VL1, but are distributed throughout the remainder of the VL1 exon. The 5' ends of individual gene conversion events always begin in regions of homology between the donor psi VL and recipient VL1 gene, whereas the 3' ends can occur in regions of nonhomology and often have nucleotide insertions or deletions. These results suggest a 5' to 3' polarity in the gene conversion mechanism. The implications of our data are discussed in relation to current molecular models of gene conversion.