We have examined the effect of RNA polymerase II-dependent transcription on recombination between directly repeated sequences of the GAL10 gene in S. cerevisiae. Direct repeat recombination leading either to plasmid loss or conversion was examined in isogenic strains containing null mutations in the positive activator, GAL4, or the repressor, GAL80. A 15-fold increase in the rate of plasmid loss is observed in cells constitutively expressing the construct compared with cells that are not. Conversion events that retain the integrated plasmid are not stimulated by expression of the repeats. Northern analysis of strains containing plasmid inserts with various promoter mutations suggests that the stimulation in recombination is mediated by events initiating within the integrated plasmid sequences.