Background: hAT elements and V(D)J recombination may have evolved from a common ancestral transposable element system. Extrachromosomal, circular forms of transposable elements(referred to here as episomal forms) have been reported yet their biological significance remains unknown. V(D)J signal joints, which resemble episomal transposable elements, have been considered non-recombinogenic products of V(D)J recombination and a safe way to dispose of excised chromosomal sequences. V(D)J signal joints can, however, participate in recombination reactions and the purpose of this study was to determine if hobo and Hermes episomal elements are also recombinogenic. Results: Up to 50% of hobo/Hermes episomes contained two intact, inverted-terminal repeats and 86% of these contained from 1-1000 bp of intercalary DNA. Episomal hobo/Hermes elements were recovered from Musca domestica (a natural host of Hermes), Drosophila melanogaster (a natural host of hobo) and transgenic Drosophila melanogaster and Aedes aegypti (with autonomous Hermes elements). Episomal Hermes elements were recovered from unfertilized eggs of M. domestica and D. melanogaster demonstrating their potential for extrachromosomal, maternal transmission. Reintegration of episomal Hermes elements was observed in vitro and in vivo and the presence of Hermes episomes resulted in lower rates of canonical Hermes transposition in vivo. Conclusion: Episomal hobo/Hermes elements are common products of element excision and can be maternally transmitted. Episomal forms of Hermes are capable of integration and also of influencing the transposition of canonical elements suggesting biological roles for these extrachromosomal elements in element transmission and regulation.