Ewing sarcoma is an aggressive paediatric cancer of the bone and soft tissue. It results from a chromosomal translocation, predominantly t(11;22)(q24:q12), that fuses the N-terminal transactivation domain of the constitutively expressed EWSR1 protein with the C-terminal DNA binding domain of the rarely expressed FLI1 protein. Ewing sarcoma is highly sensitive to genotoxic agents such as etoposide, but the underlying molecular basis of this sensitivity is unclear. Here we show that Ewing sarcoma cells display alterations in regulation of damage-induced transcription, accumulation of R-loops and increased replication stress. In addition, homologous recombination is impaired in Ewing sarcoma owing to an enriched interaction between BRCA1 and the elongating transcription machinery. Finally, we uncover a role for EWSR1 in the transcriptional response to damage, suppressing R-loops and promoting homologous recombination. Our findings improve the current understanding of EWSR1 function, elucidate the mechanistic basis of the sensitivity of Ewing sarcoma to chemotherapy (including PARP1 inhibitors) and highlight a class of BRCA-deficient-like tumours.