An activity in human cell extracts is described tt lat repairs DNA with loops of five or more unpaired bases. Repair is strand-specific and is directed by a nick located 5’ or 3’ to the loop. This repair is observed in a colorectal cancer cell line that is devoid of a wild-type hMLH1 gene and is deficient in repair of mismatches. However, a cell line with deletions in both hMSH2 alleles is deficient in repair of both loops and mismatches. Defects in loop repair may be relevant to the repetitive-sequence instability observed in cancers and other hereditary diseases.