Spontaneous recombination between direct repeats at the adenine phosphoribosyltransferase (APRT) locus in ERCC1-deficient cells generates a high frequency of rearrangements that are dependent on the process of homologous recombination, suggesting that rearrangements are formed by misprocessing of recombination intermediates. Given the specificity of the structure-specific Ercc1/Xpf endonuclease, two potential recombination intermediates are substrates for misprocessing in ERCC1- cells: heteroduplex loops and heteroduplex intermediates with nonhomologous 3' tails. To investigate the roles of each, we constructed repeats that would yield no heteroduplex loops during spontaneous recombination or that would yield two non-homologous 3' tails after treatment with the rare-cutting endonuclease I-Seel, Our results indicate that misprocessing of heteroduplex loops is not the major source of recombination-dependent rearrangements in ERCC1-deficient cells, Our results also suggest that the Erccl/Xpf endonuclease is required for efficient removal of nonhomologous 3' tails, like its Rad1/Rad10 counterpart in yeast. Thus, it is likely that misprocessing of nonhomologous 3' tails is the primary source of recombination-dependent rearrangements in mammalian cells. We also find an unexpected effect of ERCC1 deficiency on I-Scel-stimulated rearrangements, which are not dependent on homologous recombination, suggesting that the ERCC1 gene product may play a role in generating the rearrangements that arise after I-Scel-induced double-strand breaks.