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LINE-1 retrotransposition is common in human cancers and rearrangements at insertion sites can contribute to cancer-driving oncogene amplifications and promote genome instability. However, the mechanisms underlying rearrangements of L1 retrotransposition intermediates are poorly understood. To address this gap, we developed GFP-based recombination reporter assays to study the formation of L1 retrotransposition-mediated rearrangements. Using these reporters combined with long-read sequencing approaches, we find that L1 retrotransposition intermediates can recombine with distal DNA breaks to generate chromosomal rearrangements. We also find that two distinct L1 insertion intermediates can recombine with each other to generate chromosomal rearrangements. Both types of rearrangements depend on L1-encoded ORF2p endonuclease and reverse transcriptase activities. Using these reporters, we discover that L1 retrotransposition-mediated rearrangements are robustly induced when the recombining sequences share homology and that their formation requires the homologous recombination factor BRCA1. Given the repetitive nature of our genome, these findings highlight the risk of L1 insertion intermediates becoming substrates for aberrant recombination and promoting genome instability.