In Saccharomyces cerevisiae, proximity to a telomere affects both transcription and replication of adjacent DNA. In this study, we show that telomeres also impose a position effect on mitotic recombination. The rate of recombination between directly repeated tracts of telomeric C1-3A/TG1-3 DNA was reduced severely by proximity to a telomere. In contrast, recombination of two control substrates was not affected by telomere proximity. Thus, unlike position effects on transcription or replication, inhibition of recombination was sequence specific. Moreover, the repression of recombination was not under the same control as transcriptional repression (telomere position effect; TPE), as mutations in genes essential for TPE did not alleviate telomeric repression of recombination. The reduction in recombination between C1-3A/TG1-3 tracts near the telomere was caused by an absence of Rad52p-dependent events as well as a reduction in Rad1p-dependent events. The sequence-specific repression of recombination near the telomere was eliminated in cells that overexpressed the telomere-binding protein Rap1p, a condition that also increased recombination between C1-3A/TG1-3 tracts at internal positions on the chromosome. We propose that the specific inhibition between C1-3A/TG1-3 tracts near the telomere occurs through the action of a telomere-specific end-binding protein that binds to the single-strand TG1-3 tail generated during the processing of recombination intermediates. The recombination inhibitor protein may also block recombination between endogenous telomeres.