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Plasmids were constructed to investigate homologous mitotic recombination in Drosophila cells. Heteroalleles containing truncated but overlapping segments of the bacterial beta-galactosidase gene (lacZ) were positioned either on separate plasmids or as direct repeats on the same chromosome. Recombination reconstituted a functional lacZgene leading to expression of LacZ+activity detectable by histochemical staining. High extrachromosomal recombination (ECR) frequencies between unlinked heteroalleles were observed upon transient co-transfection into Drosophila melanogaster Schneider line 2 (S2) cells. Stably transfected cells containing the lacZ heteroalleles linked on a chromosome exhibited intrachromosomal recombination (ICR) frequencies two orders of magnitude lower than ECR frequencies. Recombination was inducible by exposing the cells to ethyl methanesulphonate or mitomycin C. Recombination products were characterized by multiplex PCR analysis and unequal sister chromatid recombination was found as the predominant mechanism reconstituting the lacZ gene. To investigate recombination in vivo imaginal disc cells from transgenic larvae carrying the reporter gene on the X chromosome were isolated and stained for LacZ+ activity. The presence of a few LacZ+ clones indicated that mitotic recombination events occurred at frequencies two orders of magnitude lower than the corresponding event in cultured cells and late during larval development.