Early events of DNA amplification which occur during perturbed replication were studied by using simian virus 40 (SV40)-transformed Chinese hamster cells (CO60) as a model system. The amplification is observed shortly after carcinogen treatment, and the amplified sequences contain molecules organized as inverted repeats (IRs). SV40 amplification in vitro was studied by using extracts from carcinogen-treated CO60 cells. In the amplified DNA the SV40 origin region was rereplicated, while more distal sequences were not replicated even once. Using several experimental procedures such as sucrose gradients, 'snap-back' assay, and two-dimensional gel electrophoresis, we show that the overreplicated DNA contains IRs which are synthesized de novo as hairpins or stem-loop structures which were detached from the template molecules. The fully replicated SV40 molecules synthesized by the HeLa extracts do not contain such IRs. We propose 'U-turn replication' as a novel mechanism for gene amplification, accounting for the generation of extrachromosomal inverted duplications as a result of perturbed replication and template switching of the DNA polymerases.