The budding yeast INO80 complex is a conserved ATP-dependent nucleosome remodeler containing actin-related proteins Arp5 and Arp8. Strains lacking INO80, ARP5, or ARP8 have defects in transcription. Here we show that these mutants are hypersensitive to DNA damaging agents and to double-strand breaks (DSBs) induced by the HO endonuclease. The checkpoint response and most transcriptional modulation associated with induction of DNA damage are unaffected by these mutations. Using chromatin immunoprecipitation we show that Ino80, Arp5, and Arp8 are recruited to an HO-induced DSB, where a phosphorylated form of H2A accumulates. Recruitment of Ino80 is compromised in cells lacking the H2A phosphoacceptor S129. Finally, we demonstrate that conversion of the DSB into ssDNA is compromised in arp8 and H2A mutants, which are both deficient for INO80 activity at the site of damage. These results implicate INO80-mediated chromatin remodeling directly at DSBs, where it appears to facilitate processing of the lesion.