DNA double-strand breaks (DSB) are repaired through two different pathways, homologous recombination (HR) and nonhomologous end joining (NHEJ). Yeast Xrs2, a homolog of human Nbs1, is a component of the Mre11-Rad50-Xrs2 (MRX) complex required for both HR and NHEJ. Previous studies showed that the N-terminal forkhead-associated (FHA) domain of Xrs2/Nbs1 in yeast is not involved in HR, but is likely to be in NHEJ. In this study, we showed that the FHA domain of Xrs2 plays a critical role in efficient DSB repair by NHEJ. The FHA domain of Xrs2 specifically interacts with Lif1, a component of the ligase IV complex, Dnl4-Nej1-Lif1 (DNL). Lif1, which is phosphorylated in vivo, contains two Xrs2-binding regions. Serine 383 of Lif1 plays an important role in the interaction with Xrs2 as well as in NHEJ. Interestingly, the phospho-mimetic substitutions of serine 383 enhance the NHEJ activity of Lif1. Our results suggest that the phosphorylation of Lif1 at serine 383 is recognized by the Xrs2 FHA domain, which in turn may promote recruitment of the DNL complex to DSB for NHEJ. The interaction between Xrs2 and Lif1 through the FHA domain is conserved in humans; the FHA domain Nbs1 interacts with Xrcc4, a Lif1 homolog of human.