How DNA double-strand breaks (DSBs) affect ongoing transcription remains elusive due to the lack of single-molecule resolution tools directly measuring transcription dynamics upon DNA damage. Here, we established new reporter systems that allow the visualization of individual nascent RNAs with high temporal and spatial resolution upon the controlled induction of a single DSB at two distinct chromatin locations: a promoter-proximal (PROP) region downstream the transcription start site and a region within an internal exon (EX2). Induction of a DSB resulted in a rapid suppression of preexisting transcription initiation regardless of the genomic location. However, while transcription was irreversibly suppressed upon a PROP DSB, damage at the EX2 region drove the formation of promoter-like nucleosome-depleted regions and transcription recovery. Two-color labeling of transcripts at sequences flanking the EX2 lesion revealed bidirectional break-induced transcription initiation. Transcriptome analysis further showed pervasive bidirectional transcription at endogenous intragenic DSBs. Our data provide a novel framework for interpreting the reciprocal interactions between transcription and DNA damage at distinct chromatin regions.