Chromosomal breaks occur spontaneously as a result of normal DNA metabolism and after exposure to DNA-damaging agents. A major pathway involved in chromosomal double-strand break repair is homologous recombination. In this pathway, a DNA sequence with similarity to a damaged chromosome directs the repair of the damage. The protein products of the hereditary breast cancer susceptibility genes, BRCA1 and BRCA2, interact with the Rad51 protein, a central component of homologous repair pathways. We have recently shown that this interaction is significant by demonstrating that Brca1- and BRCA2-deficient cells are defective in homology-directed chromosomal break repair. We confirm that Brca1-deficient embryonic stem (ES) cells are defective in gene targeting and homology-directed repair of an I-Sce I-induced chromosome break. The phenotypic paradigm that defines homology-directed repair mutants is extended to these Brca1-deficient cells by the demonstration of 100-fold sensitivity to the interstrand cross-linking agent mitomycin-C and spontaneous chromosome instability. Interestingly, although chromosome aberrations were evident, aneuploidy was not observed. Repair phenotypes are partially restored by expression of a Brca1 transgene, whereas correction of one mutated Brca1 allele through gene targeting fully restores mitomycin-C resistance and chromosome stability. We conclude that the inability to properly repair strand breaks by homology-directed repair gives rise to defects in chromosome maintenance that promote genetic instability and, it is likely, tumorigenesis.