A conserved DNA repair response is defective in the human genetic illness Fanconi anemia (FA). Mutation of some FA genes impairs homologous recombination and error-prone DNA repair, rendering FA cells sensitive to DNA cross-linking agents. We found a genetic interaction between the FA gene FANCC and the nonhomologous end joining (NHEJ) factor Ku70. Disruption of both FANCC and Ku70 suppresses sensitivity to cross-linking agents, diminishes chromosome breaks, and reverses defective homologous recombination. Ku70 binds directly to free DNA ends, committing them to NHEJ repair. We show that purified FANCD2, a downstream effector of the FA pathway, might antagonize Ku70 activity by modifying such DNA substrates. These results reveal a function for the FA pathway in processing DNA ends, thereby diverting double-strand break repair away from abortive NHEJ and toward homologous recombination.