Kiddushin, Chapter 4, Mishnah 7. This mishnah continues the previous one, in which Rabbi Yehudah ruled that the daughter of a male convert has the same status as the daughter of a male chalal: just as when the father is a chalal the daughter is a chalalah, so too the daughter of a convert is herself considered a convert and is forbidden to a kohen. But if a Yisrael, an ordinary Jew, married a convert, his daughter is permitted and does not have the status of a convert.
The words of our mishnah:
"Yisrael she'nasa giyores" - a Jew who married a convert: his daughter is fit to marry into the kehunah, as was explained in the previous mishnah and in the view of Rabbi Yehudah.
"Ger she'nasa bas Yisrael" - a convert who married a Jewish woman: here too the daughter is fit for the kehunah, and on this point the mishnah does not follow Rabbi Yehudah.
The exception in the words of Rabbi Eliezer ben Yaakov:
Rabbi Eliezer ben Yaakov excludes one case: "Ger she'nasa giyores" - a convert who married a convert. When both parents are converts, the daughter is disqualified from marrying a kohen, since she herself is considered a convert.
Here the mishnah adds two details:
"Echad ger v'echad eved meshuchrar" - there is no difference between a convert and a freed slave; both have the status of converts.
"Ad asarah doros" - up to ten generations: the ruling continues as long as both sides are converts, and even beyond ten generations, "ad she'tehei imo mi'Yisrael" - until at least the mother is a born Jewess and not a convert. And certainly if the father is a Jew the daughter is fit, for even Rabbi Yehudah conceded that when the father is a Jew the child is not a convert.
The view of Rabbi Yosei:
Rabbi Yosei takes the most lenient position of all: even if both parents are converts, their daughter is fit for the kehunah.
The halachah:
L'chatchilah: a kohen who comes to ask how to conduct himself is instructed according to Rabbi Eliezer ben Yaakov, that if both parents are converts he should not marry the daughter.
B'dieved: if he already married her, the halachah follows the lenient view, that even when both parents are converts the daughter is fit for the kehunah.
In summary: in this mishnah we learned that when a Jew married a convert, or a convert married a Jewish woman, their daughter is fit for the kehunah; and according to Rabbi Eliezer ben Yaakov, when a convert married a convert his daughter is disqualified, and the same applies to a freed slave, until the mother is a born Jewess. Rabbi Yosei permits even this case, and in practice the Gemara distinguished between l'chatchilah and b'dieved.