RAD18 is an E3 ubiquitin ligase that catalyzes the monoubiquitination of PCNA, a modification central to DNA damage bypass and postreplication repair in both yeast and vertebrates. Although current evidence suggests that homologous recombination provides an essential backup in vertebrate rad18 mutants, we show that in chicken DT40 cells this is not the case and that RAD18 plays a role in the recombination reaction itself. Gene conversion tracts in the immunoglobulin locus of rad18 cells are shorter and are associated with an increased frequency of deletions and duplications. rad18 cells also exhibit reduced efficiency of gene conversion induced by targeted double-strand breaks in a reporter construct. Blocking an early stage of the recombination reaction by disruption of XRCC3 not only suppresses immunoglobulin gene conversion but also prevents the aberrant immunoglobulin gene rearrangements associated with RAD18 deficiency, reverses the elevated sister chromatid exchange of the rad18 mutant, and reduces its sensitivity to DNA damage. Together, these data suggest that homologous recombination is toxic in the absence of RAD18 and show that, in addition to its established role in postreplication repair, RAD18 is also required for the orderly completion of gene conversion.