The Mre11-Rad50 complex is highly conserved, yet the mechanisms by which Rad50 ATP-driven states regulate the sensing, processing and signaling of DNA double-strand breaks are largely unknown. Here we design structure-based mutations in Pyrococcus furiosus Rad50 to alter protein core plasticity and residues undergoing ATP-driven movements within the catalytic domains. With this strategy we identify Rad50 separation-of-function mutants that either promote or destabilize the ATP-bound state. Crystal structures, X-ray scattering, biochemical assays, and functional analyses of mutant PfRad50 complexes show that the ATP-induced 'closed' conformation promotes DNA end binding and end tethering, while hydrolysis-induced opening is essential for DNA resection. Reducing the stability of the ATP-bound state impairs DNA repair and Tel1 (ATM) checkpoint signaling in Schizosaccharomyces pombe, double-strand break resection in Saccharomyces cerevisiae, and ATM activation by human Mre11-Rad50-Nbs1 in vitro, supporting the generality of the P. furiosus Rad50 structure-based mutational analyses. These collective results suggest that ATP-dependent Rad50 conformations switch the Mre11-Rad50 complex between DNA tethering, ATM signaling, and 5' strand resection, revealing molecular mechanisms regulating responses to DNA double-strand breaks.