Eukaryotic genomes contain tracts of DNA in which a single base or a small number of bases are repeated (microsatellites). Mutations in the yeast DNA mismatch repair genes MSH2, PMS1, and MLH1 increase the frequency of mutations for normal DNA sequences and destabilize microsatellites. Mutations of human homologs of MSH2, PMS1, and MLH1 also cause microsatellite instability and result in certain types of cancer. We find that a mutation in the yeast gene MSH3 that does not substantially affect the rate of spontaneous mutations at several loci increases microsatellite instability about 40-fold, preferentially causing deletions. We suggest that MSH3 has different substrate specificities than the other mismatch repair proteins and that the human MSH3 homolog (MRP1) may be mutated in some tumors with microsatellite instability.