We assayed error-prone double-strand break (DSB) repair in wild-type and isogenic Mlh1-null mouse embryonic fibroblasts containing a stably integrated DSB repair substrate. The substrate contained a thymidine kinase (tk) gene fused to a neomycin-resistance (neo) gene; the tk-neo fusion gene was disrupted in the tk portion by a 22bp oligonucleotide containing the 18 bp recognition site for endonuclease I-SceI. Following DSB-induction by transient expression of I-SceI endonuclease, cells that repaired the DSB by error-prone nonhomologous end-joining (NHEJ) and restored the correct reading frame to the tk-neo fusion gene were recovered by selecting for G418-resistant clones. The number of G418-resistant clones induced by I-SceI expression did not differ significantly between wild-type and Mlh1-deficient cells. While most DSB repair events were consistent with simple NHEJ in both wild-type and Mlh1-deficient cells, complex repair events were more common in wild-type cells. Furthermore, genomic deletions associated with NHEJ events were strikingly larger in wild-type versus Mlh1-deficient cells. Additional experiments revealed that the stable transfection efficiency of Mlh1-null cells is higher than that of wild-type cells. Collectively, our results suggest that Mlh1 modulates error-prone NHEJ by inhibiting the annealing of DNA ends containing noncomplementary base pairs or by promoting the annealing of microhomologies.