The telomeres of poxviral chromosomes comprise covalently closed hairpin structures bearing mismatched bases. These hairpins are formed as concatemeric replication intermediates and are processed into mature, unit-length genomes. The structural transitions and enzymes involved in telomere resolution are poorly understood. Here we show that the type I topoisomerase of Shope fibroma virus (SFV) can promote a recombination reaction which converts cloned SFV replication intermediates into hairpin-ended molecules resembling mature poxviral telomeres. Recombinant SFV topoisomerase linearised a palindromic plasmid bearing 1.5 kb of DNA encoding the SFV concatemer junction, at a site near the centre of inverted-repeat symmetry. Most of these linear reaction products bore hairpin tips as judged by denaturing gel electrophoresis. The resolution reaction required palindromic SFV DNA sequences and was inhibited by compounds which block branch migration (MgCl2) or poxviral topoisomerases. The resolution reaction was also slow, needed substantial quantities of topoisomerase, and required that the palindrome be extruded in a cruciform configuration. DNA cleavage experiments identified a pair of suitably oriented topoisomerase recognition sites, 90 bases from the centre of the cloned SFV terminal inverted repeat, which may mark the resolution site. These data suggest a resolution scheme in which branch migration of a Holliday junction through a site occupied by covalently bound topoisomerase molecules, could lead to telomere resolution.