Ku is a heterodimer of polypeptides of approximately 70 and 80 kDa (Ku70 and Ku80, respectively) that binds to DNA ends. Mammalian cells lacking Ku are defective in DNA double-strand break (DSB) repair and in site-specific V(D)J recombination. Here, we describe the identification and characterisation of YKU80, the gene for the Saccharomyces cerevisiae Ku80 homologue. Significantly, we find that YKU80 disruption enhances the radiosensitivity of rad52 mutant strains, suggesting that YKU80 functions in a DNA DSB repair pathway that does not rely on homologous recombination. Indeed, through using an in vivo plasmid rejoining assay, we find that YKU80 plays an essential role in illegitimate recombination events that result in the accurate repair of restriction enzyme generated DSBs. Interestingly, in the absence of YKU80function, residual repair operates through an error-prone pathway that results in recombination between short direct repeat elements. This resembles closely a predominant DSB repair pathway in vertebrates. Together, our data suggest that multiple, evolutionarily conserved mechanisms for DSB repair exist in eukaryotes. Furthermore, they imply that Ku binds to DSBs in vivo and promotes repair both by enhancing accurate DNA end joining and by suppressing alternative error-prone repair pathways. Finally, we report that yku80 mutant yeasts display dramatic telomeric shortening, suggesting that, in addition to recognising DNA damage, Ku also binds to naturally occurring chromosomal ends. These findings raise the possibility that Ku protects chromosomal termini from nucleolytic attack and functions as part of a telomeric length sensing system.