Proliferating cells acquire genome alterations during the act of DNA replication. This leads to mutation accumulation and somatic cell mosaicism in multicellular organisms, and is also implicated as an underlying cause of aging and tumorigenesis. The molecular mechanisms of DNA replication-associated genome rearrangements are poorly understood, largely due to methodological difficulties in analyzing specific replication forks in vivo. To provide an insight into this process, we analyzed the mutagenic consequences of replication fork stalling at a single, site-specific replication barrier (the Escherichia coli Tus/Ter complex) engineered into the yeast genome. We demonstrate that transient stalling at this barrier induces a distinct pattern of genome rearrangements in the newly replicated region behind the stalled fork, which primarily consist of localized losses and duplications of DNA sequences. These genetic alterations arise through the aberrant repair of a single-stranded DNA gap, in a process that is dependent on Exo1- and Shu1-dependent homologous recombination repair (HRR). Furthermore, aberrant processing of HRR intermediates, and elevated HRR-associated mutagenesis, is detectable in a yeast model of the human cancer predisposition disorder, Bloom’s syndrome. Our data reveal a mechanism by which cellular responses to stalled replication forks can actively generate genomic alterations and genetic diversity in normal proliferating cells.