Recent studies have implicated a poorly defined alternative pathway of nonhomologous end joining (alt-NHEJ) in the generation of large deletions and chromosomal translocations that are frequently observed in cancer cells. Here, we describe an interaction between two factors, hMre11/hRad50/Nbs1 (MRN) and DNA ligase IIIα/XRCC1, that have been linked with alt-NHEJ. Expression of DNA ligase IIIα and the association between MRN and DNA ligase IIIα/XRCC1 are altered in cell lines defective in the major NHEJ pathway. Most notably, DNA damage induced the association of these factors in DNA ligase IV-deficient cells. MRN interacts with DNA ligase IIIα/XRCC1, stimulating intermolecular ligation, and together these proteins join incompatible DNA ends in a reaction that mimics alt-NHEJ. Thus, our results provide novel mechanistic insights into the alt-NHEJ pathway that not only contributes to genome instability in cancer cells but may also be a therapeutic target.