The sequences flanking microsatellites isolated from the butterfly Bicyclus anynana display high levels of similarity among different loci. We examined sequence data for evidence of the two mechanisms most likely to generate these similarities, namely recombination mediated events, such as unequal crossing over or gene conversion and through transposition of mobile elements (MEs). Many sequences contained tandemly arranged microsatellites, lending support to recombination as the multiplication mechanism. There is, however, also support for ME-mediated multiplication of microsatellites and their flanking sequences. Homology with a known Lepidopteran ME was found in B. anynana microsatellite regions, and polymorphic microsatellite markers with partial similarities in their flanking sequences were passed on to the next generation independently, indicating that they are not linked. Therefore, the rise of these similarities appears to be mediated through both processes, either as an interaction between the two, or by each being responsible for part of the observations. A large proportion of microsatellites embedded in repetitive DNA is representative for most studied butterflies and moths, and a BLAST survey of the B. anynana sequences revealed four short microsatellite-associated sequences that were present in many species of Lepidoptera. The similarities usually start to deviate beyond these sequences, which suggests that they define the extremes of a repeated unit. Further study of these conserved sequences may help to understand the mechanism underlying the multiplication events, and answer the question of why these redundancies are predominantly found in this insect group.