AxinFu is a mutation in mice that causes fused tails and other developmental abnormalities as a result of insertion of an intracisternal-A particle (IAP), a murine retrotransposon, into intron 6. In a small percentage of offspring we found that the mutant allele reverts to wild-type through loss of the insertion with concomitant disappearance of the mutant phenotype. Investigation of a series of microsatellite loci in the proximal region of chromosome 17 revealed novel alleles which arise simultaneously with disappearance of IAP from AxinFu. These novel microsatellite variants are distinct from the parental alleles and those so far discovered are organized into two haplotypes. Both haplotypes demonstrate stable Mendelian inheritance. Results show that these rearrangements, which are involved in the production of the new haplotypes, exceed millions of base pairs.