The nucleoside analog 2'-C-cyano-2'-deoxy-1-β-D-arabino-pentofuranosyl-cytosine (CNDAC), currently in clinical trials for hematologic malignancies, has a novel action mechanism of causing a single-strand break after its incorporation into DNA. Double-strand breaks (DSBs) are generated thereafter in vivo and, if not repaired, pose lethal impact on cell survival. This study sought to define the mechanisms by which CNDAC-induced DSBs are formed and repaired. We demonstrated that single-strand breaks induced by CNDAC incorporation into DNA were converted to DSBs when cells progressed into the subsequent S-phase. CNDAC-induced DSBs were products of replication, rather than a consequence of apoptosis. ATM, the activator of homologous recombination (HR), was essential for cell survival after CNDAC treatment in cell lines and in primary acute myeloid leukemia samples, as were the HR components, Rad51, Xrcc3, and Brca2. Furthermore, formation of sister chromatid exchanges, a hallmark of HR, increased significantly after CNDAC-treated cells had progressed into a second replication cycle. In contrast, neither the replication stress sensor ATR nor DNA-PK, the initiator of nonhomologous end-joining of DSB, was involved in repair of CNDAC-induced damage. Together, these results indicate that HR, but not nonhomologous end-joining, is the major repair or survival mechanism for DNA damage caused by CNDAC.