A high frequency of transformation and an equal gene dosage between transformants are generally required for activity-based selection of mutants from a library obtained by directed evolution. An efficient library construction method was developed by using in vivo recombination in Hansenula polymorpha. Various linear sets of vectors and insert fragments were transformed and analyzed to optimize the in vivo recombination system. A telomere-originated autonomously replicating sequence (ARS) of H. polymorpha, reported as a recombination hot spot, facilitates in vivo recombination between the linear transforming DNA and chromosomes. In vivo recombination of two linear DNA fragments containing the telomeric ARS drastically increases the transforming frequency, up to 10-fold, compared to the frequency of circular plasmids. Direct integration of the one-end-recombined linear fragment into chromosomes produced transformants with single-copy gene integration, resulting in the same expression level for the reporter protein between transformants. This newly developed in vivo recombination system of H. polymorpha provides a suitable library for activity-based selection of mutants after directed evolution.