The faithful repair of DNA damage such as chromosomal double-strand breaks (DSBs) is crucial for genomic integrity. Aberrant repair of these lesions can result in chromosomal rearrangements, including translocations, which are associated with numerous tumours. Models predict that some translocations arise from DSB-induced recombination in differentiating lymphoid cell types or from aberrant repair of DNA damage induced by irradiation or other agents; however, a genetic system to study the aetiology of these events has been lacking. Here we use a mouse embryonic stem cell system to examine the role of DNA damage on the formation of translocations. We find that two DSBs, each on different chromosomes, are sufficient to promote frequent reciprocal translocations. The results are in striking contrast with interchromosomal repair of a single DSB in an analogous system in which translocations are not recovered. Thus, while interchromosomal DNA repair does not result in genome instability per se, the presence of two DSBs in a single cell can alter the spectrum of repair products that are recovered.