DNA instability is an important contributor to cancer development. Previously, defects in the chromosome segregation and excessive DNA double strand breaks due to the replication or oxidative stresses were implicated in DNA instability in cancer. Here, we demonstrate that DNA instability can directly result from the oncogene-induced senescence signaling. Expression of the activated form of Her2 oncogene, NeuT, in immortalized breast epithelial cells led to downregulation of the major DNA repair factor histone H2AX and a number of other components of the HR and NHEJ double strand DNA breaks repair pathways. H2AX expression was regulated at the transcriptional level via a senescence pathway involving p21-mediated regulation of CDK and Rb1. The p21-dependent downregulation of H2AX was seen both in cell culture and the MMTV-neu mouse model of Her2-positive breast cancer. Importantly, downregulation of H2AX upon Her2/NeuT expression impaired repair of double strand DNA breaks. This impairment resulted in both increased DNA instability in the form of somatic copy number alterations, and in increased sensitivity to the chemotherapeutic drug doxorubicin. Overall, these findings indicate that the Her2/NeuT oncogene signaling directly potentiates DNA instability and increases sensitivity to DNA damaging treatments.