Gene amplification plays important roles in the progression of cancer and contributes to acquired drug resistance during treatment. Amplification can initiate via dicentric palindromic chromosome production and subsequent breakage-fusion-bridge cycles. Here we show that, in fission yeast, acentric and dicentric palindromic chromosomes form by homologous recombination protein-dependent fusion of nearby inverted repeats, and that these fusions occur frequently when replication forks arrest within the inverted repeats. Genetic and molecular analyses suggest that these acentric and dicentric palindromic chromosomes arise not by previously described mechanisms, but by a replication template exchange mechanism that does not involve a DNA double-strand break. We thus propose an alternative mechanism for the generation of palindromic chromosomes dependent on replication fork arrest at closely spaced inverted repeats.