The experiments presented in this study define the molecular basis of the bm 12 mutation. Initial characterization of an alloreactive T cell clone, 4.1.4, showed this clone to recognize an allodeterminant present on the E beta b and A beta bm12 chains, but not on the bm 12 parent A beta b chain. To define the extent of sequence shared between the I-E beta product and the mutant I-A beta product, we isolated a cDNA clone of the E beta b gene and determined its nucleotide sequence. Comparison of the nucleotide sequences of E beta b, A beta b, and A beta bm12 shows the the A beta bm12 gene to be identical to the E beta b gene in the region where it differs from its A beta b parent. We predict that the bm 12 mutation arose by gene conversion of this region, which spans 14 nucleotides between amino acid residues 67-71 of the mature A beta chain, from the E beta b locus to the corresponding position at the A beta b locus. Recognition of this region, which spans one of the previously defined E beta allelic "hypervariable" regions, by an alloreactive T cell clone provides the first direct evidence of the functional importance of these hypervariable regions in T cell stimulation. The identification of a gene conversion event involving one of these allelic variable regions implicates conversion as a mechanism that acts on class II beta genes to create sequence diversity in regions of Ia molecules that interact with foreign antigen or a T cell receptor, regions where protein sequence polymorphism would presumably be selected for by the expanded ability it affords the organism to mount effective immune responses against a wider variety of foreign antigens.