The mismatch repair system of Escherichia coli K12 removes mispaired bases from DNA. Mismatch repair can occur on either strand of DNA if it lacks N6-methyladenines within 5'-GATC-3' sequences. In hemimethylated heteroduplexes, repair occurs preferentially on the unmethylated strand. If both strands are fully methylated, repair is inhibited. Mutant (dam-) strains of E. coli defective in the adenine methylase that recognizes 5'-GATC-3' sequences (Dam), and therefore defective in mismatch repair, show increased spontaneous mutation rates compared to otherwise isogenic dam+ hosts. We have isolated and characterized 91 independent mutations that arise as a consequence of the Dam- defect in a plasmid-borne phage P22 repressor gene, mnt. The majority of these mutations are A:T----G:C transitions that occur within six base pairs of the two 5'-GATC-3' sequences in the mnt gene. In contrast, the spectrum of mnt- mutations in a dam+ host is comprised of a majority of insertions of IS elements and deletions that do not cluster near Dam recognition sites. These results show that Dam-directed post-replicative mismatch repair plays a significant role in the rectification of potential transition mutations in vivo, and suggest that sequences associated with Dam recognition sites are particularly prone to replication or repair errors.