Background: Chaos game representation of genome sequences has been used for visual representation of genome sequence patterns as well as alignment-free comparisons of sequences based on oligonucleotide frequencies. However the potential of this representation for making alignment-based comparisons of whole genome sequences has not been exploited. Results: We present here a fast algorithm for identifying all local alignments between two long DNA sequences using the sequence information contained in CGR points. The local alignments can be depicted graphically in a dot-matrix plot or in text form, and the significant similarities and differences between the two sequences can be identified. We demonstrate the method through comparison of whole genomes of several microbial species. Given two closely related genomes we generate information on mismatches, insertions, deletions and shuffles that differentiate the two genomes. Conclusion: Addition of the possibility of large scale sequence ali...