We present a model for transposition that allows a choice between cointegrate formation (replicon fusion) and direct transposition. We propose that initiation of the process occurs by invasion of the target DNA by a single-stranded end of the transposable element. This leads to nicking of one of the DNA strands of the target molecule and ligation of this strand to that of the invading transposon. Transposition then occurs in a processive way by replication of the element from the invading end into the target site in a looped rolling-circle mode similar to replication of phage phi X174 replicative form to viral strand. The choice between cointegrate formation and direct transposition occurs at the nick-ligation step, which terminates the process. We suggest that the choice is determined by the topology of the transposition enzymes and could be related to whether the element generates five- or nine-base-pair repeats in the target DNA on insertion.