Serial analysis of gene expression (SAGE) not only is a method for profiling the global expression of genes, but also offers the opportunity for the discovery of novel transcripts. SAGE tags are mapped to known transcripts to determine the gene of origin. Tags that map neither to a known transcript nor to the genome were hypothesized to span a splice junction, for which the exon combination or exon(s) are unknown. To test this hypothesis, we have developed an algorithm, SAGE2Splice, to efficiently map SAGE tags to potential splice junctions in a genome. The algorithm consists of three search levels. A scoring scheme was designed based on position weight matrices to assess the quality of candidates. Using optimized parameters for SAGE2Splice analysis and two sets of SAGE data, candidate junctions were discovered for 5%-6% of unmapped tags. Candidates were classified into three categories, reflecting the previous annotations of the putative splice junctions. Analysis of predicted tags extracted from EST sequences demonstrated that candidate junctions having the splice junction located closer to the center of the tags are more reliable. Nine of these 12 candidates were validated by RT-PCR and sequencing, and among these, four revealed previously uncharacterized exons. Thus, SAGE2Splice provides a new functionality for the identification of novel transcripts and exons. SAGE2Splice is available online at http://www.cisreg.ca.