Homologous recombination (HR) requires nuclease activities at multiple steps, but the contribution of individual nucleases to the processing of double-strand DNA ends at different stages of HR has not been clearly defined. We used chicken DT40 cells to investigate the role of flap endonuclease 1 (Fen-1) in HR. FEN-1-deficient cells exhibited a significant decrease in the efficiency of immunoglobulin gene conversion while being proficient in recombination between sister chromatids, suggesting that Fen-1 may play a role in HR between sequences of considerable divergence. To clarify whether sequence divergence at DNA ends is truly the reason for the observed HR defect in FEN-1(-/-) cells we inserted a unique I-SceI restriction site in the genome and tested various donor and recipient HR substrates. We found that the efficiency of HR-mediated DNA repair was indeed greatly diminished when divergent sequences were present at the DNA break site. We conclude that Fen-1 eliminates heterologous sequences at DNA damage site and facilitates DNA repair by HR.