The longitudinal and transverse structure functions are calculated for inclusive electron scattering from 12C and 40Ca in the quasielastic and dip region. The microscopic model presented here incorporates two-body currents derived from one-pion exchange and intermediate Δ excitation. The reaction mechanism involves both one-nucleon and two-nucleon knockout processes. It is demonstrated that, even for quasielastic kinematics, two-body currents give a substantial contribution to the transverse structure function. Furthermore, the observed excess of transverse strength in the dip region between the quasielastic and delta peak can be partially ascribed to direct two-nucleon knockout following photoabsorption on a two-body current.