Two HeLa variants defective in the mismatch repair protein hPMS2 were isolated by selection for methylation tolerance. Neither variant expressed detectable hPMS2 protein as determined by western blotting. Cell extracts were defective in correcting a single base mispair and were unable to perform mismatch repair-dependent processing of a methylated DNA substrate. Correction of the repair defect and restoration of sensitivity to a methylating agent was achieved by introducing a wild-type copy of chromosome 7 on which the hPMS2 gene is located. Loss of hPMS2 function in the HeLa variants was associated with a 5-fold increase in mutation frequency in the supF gene of the pZ189 shuttle vector. Wild-type levels of mutagenesis were restored by the transferred chromosome 7. Comparisons of mutational spectra identified multiple base substitutions, frameshifts and, to a lesser extent, single base pair changes as the types of mutation which are selectively increased in a hPMS2-defective background. The location of multiple mutations and frameshifts indicates that misalignment-mediated mutagenesis could underlie most of these events. Thus the mutator phenotype associated with loss of hPMS2 most likely arises because of the failure to correct replication slippage errors. Our data also suggest that a considerable fraction of mutagenic intermediates are recognized by the hMutSbeta complex and processed via the hMLH1/hPMS2 heterodimer.