Genome rearrangements can take place by a process known as replication slippage or copy-choice recombination. The slippage occurs between repeated sequences in both prokaryotes and eukaryotes, and is invoked to explain microsatellite instability, which is related to several human diseases. We analysed the molecular mechanism of slippage between short direct repeats, using in vitro replication of a single-stranded DNA template that mimics the lagging strand synthesis. We show that slippage involves DNA polymerase pausing, which must take place within the direct repeat, and that the pausing polymerase dissociates from the DNA. We also present evidence that, upon polymerase dissociation, only the terminal portion of the newly synthesized strand separates from the template and anneals to another direct repeat. Resumption of DNA replication then completes the slippage process.