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Spontaneous deletion mutations often occur at short direct repeats that flank inverted repeat sequences. Inverted repeats may initiate genetic rearrangements by formation of hairpin secondary structures that block DNA polymerases or are processed by structure-specific endonucleases. We have investigated the ability of inverted repeat sequences to stimulate deletion of flanking direct repeats in Escherichia coli. Propensity for cruciform extrusion in duplex DNA correlated with stimulation of flanking deletion, which was partially sbcD dependent. We propose two mechanisms for palindrome-stimulated deletion, SbcCD dependent and SbcCD independent. The SbcCD-dependent mechanism is initiated by SbcCD cleavage of cruciforms in duplex DNA followed by RecA-independent single-strand annealing at the flanking direct repeats, generating a deletion. Analysis of deletion endpoints is consistent with this model. We propose that the SbcCD-independent pathway involves replication slipped mispairing, evoked from stalling at hairpin structures formed on the single-stranded lagging-strand template. The skew of SbcCD-independent deletion endpoints with respect to the direction of replication supports this hypothesis. Surprisingly, even in the absence of palindromes, SbcD affected the location of deletion endpoints, suggesting that SbcCD-mediated strand processing may also accompany deletion unassociated with secondary structures.