BLM is a DNA helicase important for the restart of stalled replication forks and for homologous recombination (HR) repair. Mutations of BLM lead to Bloom Syndrome, a rare autosomal recessive disorder characterized by elevated levels of sister chromatid exchanges (SCEs), dwarfism, immunodeficiency, infertility and increased cancer predisposition. BLM physically interacts with MUS81, an endonuclease involved in the restart of stalled replication forks and HR repair. Herein we report that loss of Mus81 in Blm hypomorph mutant mice leads to infertility, and growth and developmental defects that are not observed in single mutants. Double mutant cells and mice were hypersensitive to Mitomycin C and γ-irradiation (IR) compared with controls and their repair of DNA double-strand breaks (DSBs) mediated by HR pathway was significantly defective, whereas their non-homologous-end-joining repair was elevated compared with controls. We also demonstrate the importance of the loss of the nuclease activity of Mus81 in the defects observed in Mus81(-/-) and double mutant cells. Exacerbated IR-induced chromosomal aberration was observed in double mutant mice and despite their reduced SCE levels, these mutants showed increased tumorigenesis risks. Our data highlight the importance of Mus81 and Blm in DNA DSB repair pathways, fertility, development and cancer.