Broken DNA ends are rejoined by non-homologous end-joining (NHEJ) pathways requiring the Ku proteins (Ku70, Ku80), DNA ligase IV and its associated protein Lif1/Xrcc4 (ref. 1). In mammalian meiotic cells, Ku protein levels are much lower than in somatic cells, apparently reducing the capacity of meiotic cells to carry out NHEJ and thereby promoting homologous recombination. In Saccharomyces cerevisiae, NHEJ is also downregulated in meiosis-competent MATa/MAT alpha diploid cells in comparison with diploids or haploids expressing only MATa or MAT alpha. Diploids expressing both MATa and MAT alpha show enhanced mitotic homologous recombination. Here we report that mating-type-dependent regulation of NHEJ in budding yeast is caused in part by transcriptional repression of both LIF1 and the gene NEJ1 (YLR265C)--identified from microarray screening of messenger RNAs. Deleting NEJ1 reduces NHEJ 100-fold in MATa or MAT alpha haploids. Constitutive expression of NEJ1, but not expression of LIF1, restores NHEJ in MATa/MAT alpha cells. Nej1 regulates the subcellular distribution of Lif1. A green fluorescent protein (GFP)-Lif1 fusion protein accumulates in the nucleus in cells expressing NEJ1 but is largely cytoplasmic when NEJ1 is repressed.