Point Accepted Mutation (PAM) is the Markov model of amino acid replacements in proteins introduced by Dayhoff and her co-workers (Dayhoff et al., 1978). The PAM matrices and other matrices based on the PAM model have been widely accepted as the standard scoring system of protein sequence similarity in protein sequence alignment tools. Here, we present Contact Accepted mutatiOn (CAO), a Markov model of protein residue contact mutations. The CAO model simulates the interchanging of structurally defined side-chain contacts, and introduces additional structural information into protein sequence alignments. Therefore, similarities between structurally conserved sequences can be detected even without apparent sequence similarity. CAO has been benchmarked on the HOMSTRAD database and a subset of the CATH database, by comparing sequence alignments with reference alignments derived from structural superposition. CAO yields scores that reflect coherently the structural quality of sequence alignments, which has implications particularly for homology modelling and threading techniques. © 2003 Elsevier Science Ltd. All rights reserved.