Yeast artificial chromosomes (YACs) containing mammalian DNA potentially can undergo deletions during transformation and propagation, possibly due to interactions between repeat DNAs. To study factors involved in such rearrangements, we developed a genetic system that can signal physical changes. An Alu-HIS3-Alu cassette has been targeted to a mitotically stable YAC containing a 360-kb DNA insert of human chromosome 2. Five YACs with the cassette integrated at different positions were examined for loss of the internal HIS3 marker during transformation into yeast and subsequent growth. The average frequency of the internal marker loss in mitotically growing cells was approximately 1.0 x 10(-4). Physical analysis of His- YACs retaining both telomeric markers demonstrated that loss of the marker was due to deletions (20-90 kb). These results contrast with those obtained with YACs following transformation. Nearly 33% of the retransformed YACs lacked the internal HIS3 marker. The transformation-associated loss was also due to deletions varying from 80 to 260 kb. Similar results were obtained following retransformation with the parent human YAC and another mitotically stable YAC containing a 390-kb insert of mouse DNA. The high level of transformation-associated deletions in the human YACs was reduced over 10-fold when the host was a recombination-deficient strain deleted for the RAD52 gene. The level of internal human YAC instability during mitotic growth was also significantly decreased in the rad52 mutant strain compared to that in the isogenic Rad+ strain. However, retransformation of the rad52 mutant with a YAC-containing mouse DNA yielded comparable levels of alterations to those observed for the wildtype strain. Thus, there must be additional genetic factors involved in transformation-associated deletions in YACs. We propose that these YACs and strains can be useful tools for investigating YAC integrity. During the course of these studies a unique category of deletions was identified in mitotically propagated YACs that result from recombination between identical sequences in the telomeric region and the HIS3 cassette. In addition to the known YAC "fragmentation" method, this may provide a means for generating internal deletions as well as an alternative method for mapping.