Histone deacetylases (HDACs) are enzymes that modify key residues in histones to regulate chromatin architecture, and they play a vital role in cell survival, cell-cycle progression, and tumorigenesis. To understand the function of Hdac3, a critical component of the N-CoR/SMRT repression complex, a conditional allele of Hdac3 was engineered. Cre-recombinase-mediated inactivation of Hdac3 led to a delay in cell-cycle progression, cell-cycle-dependent DNA damage, and apoptosis in mouse embryonic fibroblasts (MEFs). While no overt defects in mitosis were observed in Hdac3^−/− MEFs, including normal H3Ser10 phosphorylation, DNA damage was observed in Hdac3^−/− interphase cells, which appears to be associated with defective DNA double-strand break repair. Moreover, we noted that Hdac3^−/− MEFs were protected from DNA damage when quiescent, which may provide a mechanistic basis for the action of HDAC inhibitors on cycling tumor cells.