Amplification of large chromosomal regions (gene amplification) is a common somatic alteration in human cancer cells and often is associated with advanced disease. A critical event initiating gene amplification is a DNA double-strand break (DSB), which is immediately followed by the formation of a large DNA palindrome. Large DNA palindromes are frequent and nonrandomly distributed in the genomes of cancer cells and facilitate a further increase in copy number. Although the importance of the formation of large DNA palindromes as a very early event in gene amplification is widely recognized, it is not known how a DSB is resolved to form a large DNA palindrome and whether any local DNA structure determines the location of large DNA palindromes. We show here that intrastrand annealing following a DNA double-strand break leads to the formation of large DNA palindromes and that DNA inverted repeats in the genome determine the efficiency of this event. Furthermore, in human Colo320DM cancer cells, a DNA inverted repeat in the genome marks the border between amplified and nonamplified DNA. Therefore, an early step of gene amplification is a regulated process that is facilitated by DNA inverted repeats in the genome.