We have identified two novel yeast genes, THO1 and THO2, that partially suppress the transcription defects of hpr1Delta mutants by overexpression. We show by in vivo transcriptional and recombinational analysis of tho2Delta cells that THO2 plays a role in RNA polymerase II (RNA pol II)-dependent transcription and is required for the stability of DNA repeats, as previously shown for HPR1. The tho2Delta mutation reduces the transcriptional efficiency of yeast DNA sequences down to 25% of the wild-type levels and abolishes transcription of the lacZ sequence. In addition, tho2Delta causes a strong increase in the frequency of recombination between direct repeats (>2000-fold above wild-type levels). Some DNA repeats cannot even be maintained in the cell. This hyper-recombination phenotype is dependent on transcription and is not observed in DNA repeats that are not transcribed. The higher the impairment of transcription caused by tho2Delta, the higher the frequency of recombination of a particular DNA region. The tho2Delta mutation also increases the frequency of plasmid loss. Our work not only identifies a novel yeast gene, THO2, with similar function to HPR1, but also provides new evidence for transcriptional blocks as a source of recombination. We propose that there is a set of proteins including Hpr1p and Tho2p, in the absence of which RNA pol II transcription is stalled or blocked, causing genetic instability.