Two paralogous, site-specific invertible loci, designated hsd1 and hsd2 (host specificity determinant), have been identified in the Mycoplasma pulmonis genome. They encode putative type I restriction and modification (R-M) systems with maximum sequence homology to the type IC family, which includes EcoR124II and EcoDXXI. Each locus encodes an endonuclease subunit (HsdR), a methylase subunit (HsdM) and two DNA specificity subunits (HsdS). The gene organization at each locus is such that hsdR and hsdM are flanked by two hsdS genes. Within each locus, one of the hsdS genes, hsdR and hsdM, is encoded in tandem by the same DNA strand, while the second hsdS gene is encoded by the complementary strand but without overlap with the other three hsd genes. The hsdR and hsdM sequences of one locus are almost identical to their counterparts in the other. The four hsdS genes (two per locus) are highly homologous at their 5' ends and also share sequence similarities in the 3' ends of their corresponding coding regions. Owing to the disposition of and sequence similarities among the hsdS genes, they form inverted repeats at each locus. Analysis by polymerase chain reaction (PCR) has shown that both loci behave as site-specific DNA invertible elements with multiple inversion sites, termed 'vipareetus', occurring within the hsdS genes. The inversions lead to a reassortment of hsdS sequences, generating an array of recombinant genes that probably encode S subunits possessing alternative DNA-binding specificities. Sequence information obtained from the analysis of hsd2 transcripts by 5' RACE (rapid amplification of cDNA ends) indicates that inversion induces the transcription of alternative hsdS genes by the relocation of coding sequences downstream of a promoter and ribosome-binding site (RES) situated at one end of each locus.