XRCC4 is a non-homologous end-joining protein employed in DNA double strand break repair and in V(D)J recombination. In mice, XRCC4-deficiency causes a pleiotropic phenotype, which includes embryonic lethality and massive neuronal apoptosis. When DNA damage is not repaired, activation of the cell cycle checkpoint protein p53 can lead to apoptosis. Here we show that p53-deficiency rescues several aspects of the XRCC4-deficient phenotype, including embryonic lethality, neuronal apoptosis, and impaired cellular proliferation. However, there was no significant rescue of impaired V(D)J recombination or lymphocyte development. Although p53-deficiency allowed postnatal survival of XRCC4-deficient mice, they routinely succumbed to pro-B-cell lymphomas which had chromosomal translocations linking amplified c-myc oncogene and IgH locus sequences. Moreover, even XRCC4-deficient embryonic fibroblasts exhibited marked genomic instability including chromosomal translocations. Our findings support a crucial role for the non-homologous end-joining pathway as a caretaker of the mammalian genome, a role required both for normal development and for suppression of tumours.