When yeast (Saccharomyces cerevisiae) is transformed with linearized plasmid DNA and the ends of the plasmid do not share homology with the yeast genome, circular inverted (head-to-head) dimer plasmids are the principal product of repair. By measurements of the DNA concentration dependence of transformation with a linearized plasmid, and by transformation with mixtures of genetically marked plasmids, we show that two plasmid molecules are required to form an inverted dimer plasmid. Several observations suggest that homologous pairing accounts for the head-to-head joining of the two plasmid molecules. First, an enhanced frequency of homologous recombination is detected when genetically marked plasmids undergo end-to-end fusion. Second, when a plasmid is linearized within an inverted repeat, such that its ends could undergo head-to-tail homologous pairing, it is repaired by intramolecular head-to-tail joining. Last, in the joining of homologous linearized plasmids of different length, a shorter molecule can acquire a longer plasmid end by homologous recombination. The formation of inverted dimer plasmids may be related to some forms of chromosomal rearrangement. These might include the fusion of broken sister chromatids in the bridge-breakage-fusion cycle and the head-to-head duplication of genomic DNA at the sites of gene amplifications.