Centromeres are essential for chromosome segregation during both mitosis and meiosis. There are no obvious or conserved DNA sequence motif determinants for centromere function, but the complex centromeres found in the majority of eukaryotes studied to date consist of repetitive DNA sequences. A striking feature of these repeats is that they maintain a high level of inter-repeat sequence identity within the centromere. This observation is suggestive of a recombination mechanism that operates at centromeres. Here we postulate that inter-repeat homologous recombination plays an intrinsic role in centromere function by forming covalently closed DNA loops. Moreover, the model provides an explanation of why both inverted and direct repeats are maintained and how they contribute to centromere function.