Bloom's syndrome (BS), which is caused by mutations in the BLM gene, is characterized by a predisposition to a wide variety of cancers. BS cells exhibit elevated frequencies of sister chromatid exchanges (SCEs), interchanges between homologous chromosomes (mitotic chiasmata), and sensitivity to several DNA-damaging agents. To address the mechanism that confers these phenotypes in BS cells, we characterize a series of double and triple mutants with mutations in BLM and in other genes involved in repair pathways. We found that XRCC3 activity generates substrates that cause the elevated SCE in blm cells and that BLM with DNA topoisomerase IIIα suppresses the formation of SCE. In addition, XRCC3 activity also generates the ultraviolet (UV)- and methyl methanesulfonate (MMS)–induced mitotic chiasmata. Moreover, disruption of XRCC3 suppresses MMS and UV sensitivity and the MMS- and UV-induced chromosomal aberrations of blm cells, indicating that BLM acts downstream of XRCC3.