Extensive intraspecific variation in the chloroplast trnL(UAA)–trnF(GAA) spacer of model plant Arabidopsis lyrata is caused by multiple copies of a tandemly repeated trnF pseudogene undergoing parallel independent changes in copy number. Linkage disequilibrium and secondary structure analyses indicate that the diversification of pseudogene copies is driven by complex processes of structurally mediated illegitimate recombination. Disperse repeats sharing similar secondary structures interact, facilitating reciprocal exchange of structural motifs between copies via intramolecular and intermolecular recombinations, forming chimeric sequences and iterative expansion and contraction in pseudogene copy numbers. Widely held assumptions that chloroplast sequence evolution is simple and structural changes are informative are violated. Our findings have important implications for the use of this highly variable region in Brassicaceae studies. The reticulate evolution and nonindependent nucleotide substitution render the pseudogene inappropriate for standard phylogenetic reconstruction, but over short evolutionary timescales they may be useful for assessing gene flow, hybridization and introgression.