Transposable elements have long been considered as potential agents of large-scale genome reorganization by virtue of their ability to induce chromosomal rearrangements such as deletions, duplications, inversions, and reciprocal translocations. Previous researchers have shown that particular configurations of transposon termini can induce chromosome rearrangements at high frequencies. By analyzing two derivatives of an unstable allele of the maize P1 (pericarp color) gene carrying both a full-length Ac (Activator) transposable element and a Ac terminal fragment termed fAc (fractured Ac) that were recovered from a classical maize ear twinned sector, it were found that the twinned alleles are a large inverted duplication and a corresponding deficiency. The sequences at the junctions of the rearrangement breakpoints indicate that the duplication and deletion structures were produced by a single transposition event involving Ac and fAc termini located on sister chromatids. Because the transposition process we describe involves transposon ends located on different DNA molecules, it is termed non-linear transposition (NLT). Non-linear transposition can rapidly break and rejoin chromosomes, and thus could have played an important role in generating structural heterogeneity during genome evolution. In addition, 9 more NLT-generated large deletion mutants were analyzed. The deletions start at the same point in the intron 2 of the P1 locus, but end at various sites up to >4.6 cM upstream the P1 allele. Genetic and molecular analysis of the deletion series provides several new insights into the genetic neighborhood of the P1 locus. First, there appears to be an essential gene upstream P2 controls the zygotic lethal phenotype. Second, the tightly P1-linked P2 gene (a duplicate of P1) contributes to the silk browning phenotype and silk maysin levels. Third, probe npi286 and dek1 that were previously thought to be proximal to P1 are probably in the distal side of P1 locus. We conclude that NLT events can efficiently generate interstitial deletions, and that the resulting nested deletions are potentially useful for dissection of local intergenic regions, and for rapid correlation of genetic and physical maps.