The alternative non-homologous end-joining (NHEJ) pathway promotes DNA double-strand break (DSB) repair in cells deficient for NHEJ or homologous recombination, suggesting that it operates at all stages of the cell cycle. Here, we use an approach in which DNA breaks can be induced in G1 cells and their repair tracked, enabling us to show that joining of DSBs is not functional in G1-arrested XRCC4-deficient cells. Cell cycle entry into S-G2/M restores DSB repair by Pol θ-dependent and PARP1-independent alternative NHEJ with repair products bearing kilo-base long DNA end resection, micro-homologies and chromosome translocations. We identify a synthetic lethal interaction between XRCC4 and Pol θ under conditions of G1 DSBs, associated with accumulation of unresolved DNA ends in S-G2/M. Collectively, our results support the conclusion that the repair of G1 DSBs progressing to S-G2/M by alternative NHEJ drives genomic instability and represent an attractive target for future DNA repair-based cancer therapies.