Plasmids carrying two IS30 elements in the same orientation, as in the composite transposon Tn2706, are structurally unstable in Escherichia coli. A primary segregation product is formed by site-specific deletion of the sequences carried between the two IS30 elements. The resulting covalently closed replicon carries the two IS30 elements as tandem repeats separated by only 2 bp. This (IS30)2 structure is extremely unstable, but it can nevertheless be isolated on its vector plasmid and, after purification, can be reintroduced into host cells by transformation. Among the descendants of transformants of recA- bacteria, replicated copies of the introduced (IS30)2 structure are still present, together with various kinds of segregation products which provide evidence for the efficient generation of DNA rearrangements. Most abundant is the product of another site-specific recombination between two identical ends of the IS30 elements involved, which results in the presence of just one intact IS30 on the plasmid. Apart from this, and depending on the presence of appropriate targets for IS30 transposition, various transposition products of (IS30)2 are also seen. Intramolecular reactions lead to DNA inversions and deletions with breakpoints other than IS30 ends. In intermolecular reactions inverse transposition occurs at high frequency and one also obtains simple transposition and cointegration. A mutational study revealed the requirement in cis of one intact IS30 transposase gene and of both proximal ends of the two IS30 elements concerned not only for the formation of (IS30)2, but also for its further rearrangement reactions, including the efficient formation of site-specific deletions. A model is proposed, which postulates that (IS30)2 intermediates play a key role in IS30 transposition pathways in which the formation of (IS30)2 may be rate-limiting. Once this structure is formed, it gives rise to a burst of transpositional rearrangements in the subclone carrying (IS30)2. Evolutionary implications of these findings are discussed.