The KNOTTED-1 (KN1) locus is defined by a number of dominant mutations that affect leaf development. The Kn1-O mutation is characterized by outpocketings of tissue along lateral veins of the maize leaf and by displacement of ligule tissue from the junction of the blade and sheath into the blade. Kn1-O results from a tandem duplication of 17 kb; each repeat includes the entire 8-kb KN1 transcription unit. Mutator (Mu) transposable elements inserted at the junction of the two repeats diminish the mutant phenotype. The Mu insertions affect the Kn1-O mutation in several distinctive ways. (1) Two of the three Mu elements, a Mu1 and a Mu8 element, diminish the mutant phenotype only when active as indicated by hypomethylation; when methylated or inactive, the phenotype is comparable to the Kn1-O progenitor. (2) Additional rearrangements have arisen in these derivatives that further reduce the mutant phenotype. (3) A 100-2000-fold increase in the loss of one repeat occurs in the presence of Mu elements as compared to Kn1-O without elements. The high frequency of loss only occurs when the Mu elements are hypomethylated. The frequency is also influenced by the specific allele carried at the same locus on the homologous chromosome. Reciprocal exchange of flanking markers does not accompany the loss events. Various recombination models that address the events occurring at Kn1-O are presented.