DNA double-strand breaks are repaired by multiple mechanisms that are roughly grouped into the categories of homology-directed repair and non-homologous end joining. End-joining repair can be further classified as either classical non-homologous end joining, which requires DNA ligase 4, or "alternative" end joining, which does not. Alternative end joining has been associated with genomic deletions and translocations, but its molecular mechanism(s) are largely uncharacterized. Here, we report that Drosophila melanogaster DNA polymerase theta (pol theta), encoded by the mus308 gene and previously implicated in DNA interstrand crosslink repair, plays a crucial role in DNA ligase 4-independent alternative end joining. In the absence of pol theta, end joining is impaired and residual repair often creates large deletions flanking the break site. Analysis of break repair junctions from flies with mus308 separation-of-function alleles suggests that pol theta promotes the use of long microhomologies during alternative end joining and increases the likelihood of complex insertion events. Our results establish pol theta as a key protein in alternative end joining in Drosophila and suggest a potential mechanistic link between alternative end joining and interstrand crosslink repair.