In the absence of a combined nitrogen source, such as ammonia, approximately every tenth vegetative cell along filaments of the cyanobacterium Anabaena develops into a heterocyst, a terminally differentiated cell that is morphologically and biochemically specialized for nitrogen fixation. At least two specific DNA rearrangements involving the nitrogen-fixation (nif) genes occur during heterocyst differentiation, one within the nifD gene and the other near the nifS gene. The two rearrangements have several properties in common. Both occur quantitatively in all heterocyst genomes, both occur at approximately the same developmental time, late in the process of heterocyst differentiation, and both result from site-specific recombination between short repeated DNA sequences. We report here the nucleotide sequences found at the site of recombination near the nifS gene. These sequences differ from those found previously for the nifD rearrangement, suggesting that the two rearrangements are catalysed by different enzymes and may be regulated independently. We also show that the nifS gene is transcribed only from rearranged genomes.