DNA double-stranded breaks (DSBs) elicit a checkpoint response that causes a delay in cell cycle progression. Early in the checkpoint response, histone H2AX is phosphorylated in the chromatin region flanking the DSB by ATM/ATR and DNA-PK kinases. The resulting foci of phosphorylated H2AX (gamma-H2AX) serve as a platform for recruitment and retention of additional components of the checkpoint-signaling cascade that enhance checkpoint signaling and DSB repair. Upon repair, both the assembled protein complexes and the chromatin modifications are removed to quench the checkpoint signal. In this study, we show that the DNA damage-responsive Wip1 phosphatase is bound to chromatin. Moreover, Wip1 directly dephosphorylates gamma-H2AX and cells depleted of Wip1 fail to dephosphorylate gamma-H2AX during checkpoint recovery. Conversely, premature activation of Wip1 leads to displacement of MDC1 from damage foci and prevents activation of the checkpoint. Taken together, our data show that Wip1 has an essential role in dephosphorylation of gamma-H2AX to silence the checkpoint and restore chromatin structure once DNA damage is repaired.