Base J (β-D-glucosyl-hydroxymethyluracil) replaces 1% of T in the Leishmania genome and is only found in telomeric repeats (99%) and in regions where transcription starts and stops. This highly restricted distribution must be co-determined by the thymidine hydroxylases (JBP1 and JBP2) that catalyze the initial step in J synthesis. To determine the DNA sequences recognized by JBP1/2, we used SMRT sequencing of DNA segments inserted into plasmids grown in Leishmania tarentolae. We show that SMRT sequencing recognizes base J in DNA. Leishmania DNA segments that normally contain J also picked up J when present in the plasmid, whereas control sequences did not. Even a segment of only 10 telomeric (GGGTTA) repeats was modified in the plasmid. We show that J modification usually occurs at pairs of Ts on opposite DNA strands, separated by 12 nucleotides. Modifications occur near G-rich sequences capable of forming G-quadruplexes and JBP2 is needed, as it does not occur in JBP2-null cells. We propose a model whereby de novo J insertion is mediated by JBP2. JBP1 then binds to J and hydroxylates another T 13 bp downstream (but not upstream) on the complementary strand, allowing JBP1 to maintain existing J following DNA replication.