Recombination between a diffusible reverse transcript and its homologous chromosomal allele has been proposed as a mechanism for the precise removal of introns from DNA and gene conversion of dispersed repeated sequences. We have reported that RNA-mediated recombination occurs in the yeast Saccharomyces cerevisiae. This recombination requires expression of the retrotransposon Ty, and results in intron loss from a plasmid-borne marker gene and the formation of pseudogenes. Because the pseudogenes are embedded in Ty sequences, chromosomal insertion could have been mediated by Ty integrase or by homologous recombination with endogenous Ty sequences. The structure of the chromosomal recombinants and the fact that plasmid and chromosomal recombination can have different requirements demanded a direct demonstration of RNA-mediated gene conversion of a chromosomal allele. Here we report the first demonstration, to our knowledge, of recombination between a reverse transcript and its chromosomal homologue and describe an assay that specifically detects this novel recombination pathway.