Prokaryotic genomes are substantially diverse, even when from closely related species, with the resulting phenotypic diversity representing a repertoire of adaptations to specific constraints. Within the microbial population, genome content may not be fixed, as changing selective forces favor particular phenotypes; however, organisms well adapted to particular niches may have evolved mechanisms to facilitate such plasticity. The highly diverse Helicobacter pylori is a model for studying genome plasticity in the colonization of individual hosts. For H. pylori, neither point mutation, nor intergenic recombination requiring the presence of multiple colonizing strains, is sufficient to fully explain the observed diversity. Here we demonstrate that H. pylori has extensive, non-randomly distributed repetitive chromosomal sequences, and that recombination between identical repeats contributes to the variation within individual hosts. That H. pylori is representative of prokaryotes, especially those with smaller (<2 megabases) genomes, that have similarly extensive direct repeats, suggests that recombination between such direct DNA repeats is a widely conserved mechanism to promote genome diversification.