Yeast mutants lacking telomerase are capable of maintaining telomeres by an alternate mechanism that depends on homologous recombination. We show here, by using Kluyveromyces lactis cells containing two types of telomeric repeats, that recombinational telomere elongation generates a repeating pattern common in most or all telomeres in survivors that retain both repeat types. We propose that these patterns arise from small circles of telomeric DNA being used as templates for rolling-circle gene conversion and that the sequence from the lengthened telomere is spread to other telomeres by additional, more typical gene conversion events. Consistent with this, artificially constructed circles of DNA containing telomeric repeats form long tandem arrays at telomeres when transformed into K. lactis cells. Mixing experiments done with two species of telomeric circles indicated that all of the integrated copies of the transforming sequence arise from a single original circular molecule.