Mutations in the gene defective in Fanconi anemia complementation group C, FAC, are responsible for a subset of Fanconi anemia, a group of autosomal recessive disorders characterized by chromosomal instability, hypersensitivity to cross-linking agents, and cancer susceptibility. Although abnormalities in DNA repair have been suspected, localization of the FAC gene product to the cytoplasm has cast doubt on such a mechanism. Monitoring of interstrand DNA cross-linking shows that the predominant defect in group C cells is in the initial induction of cross-links, not in repair synthesis. Both the cross-linking defect and the enhanced cytotoxicity of cross-linkers on Fanconi anemia group C cells are corrected completely by cytoplasmic isoforms of the FAC protein, but not by an isoform targeted to the nucleus. The ability of FAC to correct these phenotypic abnormalities reaches a maximum threshold despite overexpression leading to higher levels of cytosolic protein. These results demonstrate that cytoplasmic localization is essential for the intracellular activity of the FAC protein. It is proposed that this activity is coupled to a cytoplasmic defense mechanism against a specific class of genotoxic agents.