Liver cancer is one of the major human tumors in the world. Basic and epidemiological studies have proposed that the major risk factors for liver cancer include alcohol and diet as well as infection with hepatitis B and C viruses. However, the mechanistic clues for the development of this type of cancer is largely unknown. Poly(ADP-ribose) polymerase (PARP-1) and a component of nonhomologous end-joining (NHEJ) machinery, Ku80, are two major DNA end-binding molecules that play a multifunctional role in DNA damage signaling and repair, recombination as well as the maintenance of genomic stability. Here we show that the interaction of PARP-1 and Ku80 is essential for development because PARP-1/Ku80 double null mice died at embryonic day (E) 9.5. Interestingly, haplo-insufficiency of Ku80 in PARP-1-/- mice promotes the development of hepatocellular adenoma and hepatocellular carcinoma (HCC). These tumors exhibited a multistage tumor progression associated with the loss of E-cadherin expression and the mutation of beta-catenin. Cytogenetic analysis revealed that Ku80 heterozygosity elevated chromosomal instability in PARP-1-/- cells and that these liver tumors harbored a high degree of chromosomal aberrations including fragmentations, end-to-end fusions, and recurrent nonreciprocal translocations (NRT). These features are reminiscent of human HCC. Taken together, these data implicate a synergistic function of Ku80 and PARP-1 in minimized chromosome aberrations and cancer development and suggest that defects in DNA end-processing molecules may be etiological factors in human HCC formation.