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The DNA damage response is essential to safeguard genome integrity. Although the contribution of chromatin in DNA repair has been investigated 1,2 , the contribution of chromosome folding to these processes remains unclear 3 . Here we report that, after the production of double-stranded breaks (DSBs) in mammalian cells, ATM drives the formation of a new chromatin compartment (D compartment) through the clustering of damaged topologically associating domains, decorated with γH2AX and 53BP1. This compartment forms by a mechanism that is consistent with polymer-polymer phase separation rather than liquid-liquid phase separation. The D compartment arises mostly in G1 phase, is independent of cohesin and is enhanced after pharmacological inhibition of DNA-dependent protein kinase (DNA-PK) or R-loop accumulation. Importantly, R-loop-enriched DNA-damage-responsive genes physically localize to the D compartment, and this contributes to their optimal activation, providing a function for DSB clustering in the DNA damage response. However, DSB-induced chromosome reorganization comes at the expense of an increased rate of translocations, also observed in cancer genomes. Overall, we characterize how DSB-induced compartmentalization orchestrates the DNA damage response and highlight the critical impact of chromosome architecture in genomic instability., (© 2023. The Author(s).)