The minute virus of mice initiator protein, NS1, excises new copies of the left viral telomere in a single sequence orientation, dubbed flip, during resolution of the junction between monomer genomes in palindromic dimer intermediate duplexes. We examined this reaction in vitro using both (32)P-end-labeled linear substrates and similar unlabeled templates labeled by incorporation of [alpha-(32)P]TTP during the synthesis. The observed products suggest a resolution model that explains conservation of the hairpin sequence and in which a novel heterocruciform intermediate plays a crucial role. In vitro, NS1 initiates two replication pathways from OriL(TC), the single active origin embedded in one arm of the dimer junction. NS1-mediated nicking liberates a base-paired 3' nucleotide to prime DNA synthesis and, in a reaction we call "read-through synthesis," forks established while the substrate is a linear duplex synthesize DNA in the flop orientation, leading to DNA amplification but not to junction resolution. Nicking leaves NS1 covalently attached to the 5' end of the DNA, where it can serve as a 3'-to-5' helicase, unwinding the NS1-associated strand. In the second pathway, resolution substrates are created when such unwinding induces the palindrome to reconfigure into a cruciform prior to fork assembly. New forks can then synthesize DNA in the flip orientation, copying one cruciform arm and creating a heterocruciform intermediate. Resolution proceeds via hairpin transfer in the extended arm of the heterocruciform, which releases one covalently closed duplex telomere and a partially single-stranded junction intermediate. We suggest that the latter intermediate is finally resolved via an NS1-induced single-strand nick at the otherwise inactive origin, OriL(GAA).