We have investigated two reactions that occur on telomeric sequences introduced into Saccharomyces cerevisiae cells by transformation. The elongation reaction added repeats of the yeast telomeric sequence C1-3A to telomeric sequences at the end of linear DNA molecules. The reaction worked on the Tetrahymena telomeric sequence C4A2 and also on the simple repeat CA. The reaction was orientation specific: it occurred only when the GT-rich strand ran 5' to 3' towards the end of the molecule. Telomere elongation occurred by non-template-directed DNA synthesis rather than any type of recombination with chromosomal telomeres, because C1-3A repeats could be added to unrelated DNA sequences between the CA-rich repeats and the terminus of the transforming DNA. The elongation reaction was very efficient, and we believe that it was responsible for maintaining an average telomere length despite incomplete replication by template-directed DNA polymerase. The resolution reaction processed a head-to-head inverted repeat of telomeric sequences into two new telomeres at a frequency of 10(-2) per cell division.