A covalently closed, circular heteroduplex containing a G-T mismatch and a single hemimethylated d(GATC) site is subject to efficient methyl-directed mismatch correction in Escherichia coli extracts when repair DNA synthesis is severely restricted by limiting the concentration of exogenously supplied deoxyribonucleoside-5'-triphosphates or by supplementing reactions with chain-terminating 2',3'-dideoxynucleoside triphosphates. However, repair under these conditions results in formation of a single-strand gap in the region of the molecule containing the mismatch and the d(GATC) site. These findings indicate that repair DNA synthesis required for methyl-directed correction can initiate in the vicinity of the mispair, and they are most consistent with a repair reaction involving 3'----5' excision (or strand displacement) from the d(GATC) site followed by 5'----3' repair DNA synthesis initiating in the vicinity of the mismatch.