We recently reported that two Chinese hamster mutants deficient in the RAD51 paralogs XRCC2 and XRCC3 show reduced radiosensitization after treatment with caffeine, thus implicating homology-directed repair (HDR) of DNA double-strand breaks (DSBs) in the mechanism of caffeine radiosensitization. Here, we investigate directly the effect of caffeine on HDR initiated by DSBs induced by a rare cutting endonuclease (I-SceI) into one of two direct DNA repeats. The results demonstrate a strong inhibition by caffeine of HDR in wild-type cells, and a substantial reduction of this effect in HDR-deficient XRCC3 mutant cells. Inhibition of HDR and cell radiosensitization to killing shows similar dependence on caffeine concentration suggesting a cause-effect relationship between these effects. UCN-01, a kinase inhibitor that effectively abrogates checkpoint activation in irradiated cells, has only a small effect on HDR, indicating that similar to radiosensitization, inhibition of checkpoint signaling is not sufficient for HDR inhibition. Recombination events occurring during treatment with caffeine are characterized by rearrangements reminiscent to those previously reported for the XRCC3 mutant, and immunofluorescence microscopy demonstrates significantly reduced formation of IR-specific RAD51 foci after caffeine treatment. In summary, our results identify inhibition of HDR as a significant contributor to caffeine radiosensitization.