1,2:5,6-Dianhydrogalactitol (DAG) is a bifunctional DNA-targeting agent causing N7-guanine alkylation and inter-strand DNA crosslinks currently in clinical trial for treatment of glioblastoma. While preclinical studies and clinical trials have demonstrated antitumor activity of DAG in a variety of malignancies, understanding the molecular mechanisms underlying DAG-induced cytotoxicity is essential for proper clinical qualification. Using non-small cell lung cancer (NSCLC) as a model system, we show that DAG-induced cytotoxicity materializes when cells enter S phase with unrepaired N7-guanine DNA crosslinks. In S phase, DAG-mediated DNA crosslink lesions translated into replication-dependent DNA double-strand breaks (DSBs) that subsequently triggered irreversible cell cycle arrest and loss of viability. DAG-treated NSCLC cells attempt to repair the DSBs by homologous recombination (HR) and inhibition of the HR repair pathway sensitized NSCLC cells to DAG-induced DNA damage. Accordingly, our work describes a molecular mechanism behind N7-guanine crosslink-induced cytotoxicity in cancer cells and provides a rationale for using DAG analogs to treat HR-deficient tumors.