Sixty-six haplotypes at a locus containing a simple dinucleotide (CA)n microsatellite repeat were isolated by PCR-single-strand conformational polymorphism from populations of the horseshoe crab Limulus polyphemus. These haplotypes were sequenced to assess nucleotide variation directly. Thirty-four distinct sequences (alleles) were identified in a region 570 bp long that included the microsatellite motif. In the repeat region itself, CA-number varied in integer values from 5 to 11 across alleles, except that a (CA)8 class was not observed. Differences among alleles were due also to polymorphisms at 22 sites in regions immediately flanking the microsatellite repeats. Nucleotide substitutions in these regions were used to estimate phylogenetic relationships among alleles, and the gene phylogeny was used to trace the evolution of length variation and CA repeat numbers. A low correlation between size variation and genealogical relationships among alleles suggests that absolute fragment size (as normally scored in microsatellite assays) is an unreliable indicator of historical affinities among alleles. This finding on the molecular fine structure of microsatellite variation suggests the need for caution in the use of repeat counts at microsatellite loci as secure indicators of allelic relationships.