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My 2008 biology book (1) states that some 10% of the human genome consists of relatively short (~300 nucleotides long) Alu elements which do not code for proteins but many of which are transcribed into RNA. Do these Alu elements have any function in the cell?

(1) Biology, 8th ed., Campbell & Reece, 2008

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Alu elements are a type of transposable element. They possess the means for their own duplication and movement. Alu is a SINE-like element that is transcribed by RNA Pol III, and so a single DNA copy can make multiple RNA copies, each capable of inserting into DNA, so it's no wonder they have a very high copy number. Here is a picture of one means of insertion http://www.nature.com/nrg/journal/v3/n5/box/nrg798_BX1.html, although there are likely others.

They do not have "a function" per se, in that they are not selected for, they are just rarely selected against and there are so many of them. They do not add functionality, but rather are one half of the "war" between transposable elements and viruses versus the genome's evolution to mitigate the damage they cause. They are, of course, commonly used as sources of new DNA for sequence evolution, or can be used to create transpositions or other chromosome rearrangements, but mostly they just fail to cause too much damage and so tend to accumulate in the genome.

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Because of the retrotransposon ability of Alu and other interspersed elements, insertion into parts of the genome can contribute to genetic diversity among the population. This can be analogous to random point mutations accumulated throughout a lifetime.

Some of these mutations can be beneficial and increase the overall fitness of the organism. However, many of these mutations and random insertions are harmful especially when elements insert themselves into essential genes or tumor suppressor genes (which leads to cancer).

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I've really not studied this, however wikipedia does a good job talking about some of the functions, particularly the associated diseases that result from changed in those sequences. Of particular interest is this sentence:

The discovery of Alu subfamilies led to the hypothesis of master/source genes, and provided the definitive link between transposable elements (active elements) and interspersed repetitive DNA (mutated copies of active elements).

The article goes on to discuss the effects of Alu changes:

Alu elements are a common source of mutation in humans, but such mutations are often confined to non-coding regions where they have little discernible impact on the bearer[citation needed]. However, the variation generated can be used in studies of the movement and ancestry of human populations[citation needed], and the mutagenic effect of Alu[9] and retrotransposons in general[10] has played a major role in the recent evolution of the human genome. There are also a number of cases where Alu insertions or deletions are associated with specific effects in humans:

Associations with human disease

Alu insertions are sometimes disruptive and can result in inherited disorders. However, most Alu variation acts as markers that segregate with the disease so the presence of a particular Alu allele does not mean that the carrier will definitely get the disease. The first report of Alu-mediated recombination causing a prevalent inherited predisposition to cancer was a 1995 report about hereditary nonpolyposis colorectal cancer.

The following human diseases have been linked with Alu insertions:

Breast cancer

Ewing's sarcoma

Familial hypercholesterolemia

Hemophilia

Neurofibromatosis

Diabetes mellitus type II

And the following diseases have been associated with single-nucleotide DNA variations in Alu elements impacting transcription levels:

Alzheimer's disease

Lung cancer

Gastric cancer

Other alu-associated human mutations

The ACE gene, encoding Angiotensin-converting_enzyme, has 2 common variants, one with an Alu insertion (ACE-I) and one with the Alu deleted (ACE-D). This variation has been linked to changes in sporting ability: the presence of the Alu element is associated with better performance in endurance-oriented events (e.g. triathlons), whereas its absence is associated with strength- and power-oriented performance

The opsin gene duplication which resulted in the re-gaining of trichromacy in Old World primates (including humans) is flanked by an Alu element, implicating the role of Alu in the evolution of three colour vision.

Of course, there is still a great deal to study on this. For instance, the University of Iowa has a team studying this "junk" DNA.

Part of the answer to how and why primates differ from other mammals, and humans differ from other primates, may lie in the repetitive stretches of the genome that were once considered "junk."

A new study by researchers at the University of Iowa Carver College of Medicine finds that when a particular type of repetitive DNA segment, known as a Alu element, is inserted into existing genes, it can alter the rate at which proteins are produced -- a mechanism that could contribute to the evolution of different biological characteristics in different species. The study was published in the Feb. 15 issue of the journal Proceedings of the National Academy of Sciences (PNAS).

"Repetitive elements of the genome can provide a playground for the creation of new evolutionary characteristics," said senior study author Yi Xing, Ph.D., assistant professor of internal medicine and biomedical engineering, who holds a joint appointment in the UI Carver College of Medicine and the UI College of Engineering. "By understanding how these elements function, we can learn more about genetic mechanisms that might contribute to uniquely human traits."

Alu elements are a specific class of repetitive DNA that first appeared about 60 to 70 million years ago during primate evolution. They do not exist in genomes of other mammals. Alu elements are the most common form of mobile DNA in the human genome, and are able to transpose, or jump, to different positions in the genome sequence. When they jump into regions of the genome containing existing genes, these elements can become new exons -- pieces of messenger RNAs that carry the genetic information.

There is a paper by Srikanta et al entitled An alternative pathway for Alu retrotransposition suggests a role in DNA double-strand break repair (PDF).

Hope that helps.

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