During B and T cell development, the RAG1/RAG2 protein complex cleaves DNA at conserved recombination signal sequences (RSS) to initiate V(D)J recombination. RAG1/2 has also been shown to catalyze transpositional strand transfer of RSS-containing substrates into target DNA to form branched DNA intermediates. We show that RAG1/2 can resolve these intermediates by two pathways. RAG1/2 catalyzes hairpin formation on target DNA adjacent to transposed RSS ends in a manner consistent with a model leading to chromosome translocations. Alternatively, disintegration removes transposed donor DNA from the intermediate. At high magnesium concentrations, such as are present in mammalian cells, disintegration is the favored pathway of resolution. This may explain in part why RAG1/2-mediated transposition does not occur at high frequency in cells.