XRCC1 plays a key role in the repair of DNA base damage and single-strand breaks. Although it has no known enzymatic activity, XRCC1 interacts with multiple DNA repair proteins and is a subunit of distinct DNA repair protein complexes. Here we used the yeast two-hybrid genetic assay to identify mutant versions of XRCC1 that are selectively defective in interacting with a single protein partner. One XRCC1 mutant, A482T, that was defective in binding to polynucleotide kinase phosphatase (PNKP) not only retained the ability to interact with partner proteins that bind to different regions of XRCC1 but also with aprataxin and aprataxin-like factor whose binding sites overlap with that of PNKP. Disruption of the interaction between PNKP and XRCC1 did not impact their initial recruitment to localized DNA damage sites but dramatically reduced their retention there. Furthermore, the interaction between PNKP and the DNA ligase IIIα-XRCC1 complex significantly increased the efficiency of reconstituted repair reactions and was required for complementation of the DNA damage sensitivity to DNA alkylation agents of xrcc1 mutant cells. Together our results reveal novel roles for the interaction between PNKP and XRCC1 in the retention of XRCC1 at DNA damage sites and in DNA alkylation damage repair.