The Mus81-Eme1 endonuclease is implicated in the efficient rescue of broken replication forks in Saccharomyces cerevisiae and Schizosaccharomyces pombe. We have used gene targeting to study the function of the Mus81-Eme1 endonuclease in mammalian cells. Mus81-deficient mice develop normally and are fertile. Surprisingly, embryonic fibroblasts from Mus81(-/-) animals fail to proliferate in vitro. This proliferation defect can be rescued by expression of the papillomavirus E6 protein that promotes degradation of p53. When grown in culture, Mus81(-/-) cells have elevated levels of DNA damage, acquire chromosomal aberrations, and are hypersensitive to agents that generate DNA cross-links. In contrast to the situation in yeast, murine Mus81 is not required for replication restart following camptothecin treatment. Mus81(-/-) mice and cells are hypersensitive to DNA cross-linking agents. Cross-link-induced double-strand break formation is normal in Mus81(-/-) cells, but the resolution of repair intermediates is not. The persistence of Rad51 foci in Mus81(-/-) cells suggests that Mus81 acts at a late step in the repair of cross-link-induced lesions. Despite these defects, Mus81(-/-) mice do not show increased predisposition to lymphoma or any other malignancy in the first year of life.