VH replacement has been proposed as one way to modify unwanted antibody specificities, but analysis of this mechanism has been limited without a dynamic cellular model. We describe a human cell line that spontaneously undergoes serial VH gene replacement mediated by cryptic recombination signal sequences (cRSS) located near the 3′ end of VH genes. Recombination-activating gene products, RAG-1 and RAG-2, bind and cleave the cRSS to generate DNA deletion circles during the VH replacement process. A VH replacement contribution to normal repertoire development is revealed by the identification of VH replacement "footprints" in IgH sequences and double-stranded DNA breaks at VH cRSS sites in immature B cells. Surprisingly, the residual 3′ sequences of replaced VH genes contribute charged amino acids to the CDR3 region, a hallmark of autoreactive antibodies.