Trinucleotide repeat expansion is the causative mutation for a growing number of diseases including myotonic dystrophy, Huntington's disease, and fragile X syndrome. A (CTG/CAG)130 tract cloned from a myotonic dystrophy patient was inserted in both orientations into the genome of Saccharomyces cerevisiae. This insertion was made either very close to the 5' end or very close to the 3' end of a URA3 transcription unit. Regardless of its orientation, no evidence was found for triplet-mediated transcriptional repression of the nearby gene. However, the stability of the tract correlated with its orientation on the chromosome. In one orientation, the (CTG/CAG)130 tract was very unstable and prone to deletions. In the other orientation, the tract was stable, with fewer deletions and two possible cases of expansion detected. Analysis of the direction of replication through the region showed that in the unstable orientation the CTG tract was on the lagging-strand template and that in the stable orientation the CAG tract was on the lagging-strand template. The orientation dependence of CTG/CAG tract instability seen in this yeast system supports models involving hairpin-mediated polymerase slippage previously proposed for trinucleotide repeat expansion.