DNA rearrangement (recombination) mediated by direct repeats is a major cause of genome instability. In Escherichia coli, direct repeats in close proximity can mediate efficient recA-independent intramolecular recombination, which produces multiple products. Using plasmid substrates, three basic forms of products have been revealed: the monomeric deletion product and two dimeric products. The frequency of recombination has been shown to be affected by structural factors such as the length of the repeat and the distance between the repeats. We show here that these factors also affect the relative abundance of each form of the product. Recombination between very short tandem repeats yields exclusively the monomeric product. Lengthening the repeats increases the abundance of the dimeric products. Increasing the distance separating the repeats sharply reduces the formation of the monomeric product. These results can be explained by a model for DNA rearrangement (recombination) involving DNA replication. We propose that misalignment of the repeats at the replication fork creates a recombinogenic intermediate that can be differentially processed to form the three basic products. The proposed sister-strand recombination mediated by direct repeats might be a general mechanism for deletion and/or amplification of repeated sequence in both prokaryotic and eukaryotic genomes.