DNA methyltransferase 1 (DNMT1) maintains methylation at CpG dinucleotides, important for transcriptional silencing at many loci. It is also implicated in stabilizing repeat sequences: DNMT1 deficiency causes microsatellite instability in mouse embryonic stem cells, but it is unclear how this occurs, how repeats lacking CpG become unstable and whether the effect is confined to stem cells. To address these questions, we transfected hTERT-immortalized normal human fibroblasts (hTERT-1604) with a short hairpin RNA construct targeting DNMT1 and isolated stable integrants with different levels of protein. DNMT1 expression levels agreed well with methylation levels at imprinted genes. Knockdown cells showed two key characteristics of mismatch repair (MMR) deficiency, namely resistance to the drug 6-thioguanine and up to 10-fold elevated mutation rates at a CA₁₇ microsatellite reporter, but had limited viability. The likely cause of MMR defects is a matching drop in steady-state protein levels for key repair components in DNMT1 knockdown cells, affecting both the MutLα and MutSα complexes. This indirect effect on MMR proteins was also seen using a different targeting method in HT29 colon cancer cells and did not involve transcriptional silencing of the respective genes. Decreased levels of MMR components follow activation of the DNA damage response and blocking this response, and in particular poly(ADP-ribose) polymerase (PARP) overactivation, rescues cell viability in DNMT1-depleted cells. These results offer an explanation for how and why unmethylated microsatellite repeats can be destabilized in cells with decreased DNMT1 levels and uncover a novel and important role for PARP in this process.