Hexanucleotide repeat expansions represent the most common genetic cause of amyotrophic lateral sclerosis (ALS) and frontotemporal dementia, though the mechanisms by which such expansions cause neurodegeneration are poorly understood. We report elevated levels of DNA–RNA hybrids (R-loops) and double strand breaks in rat neurons, human cells and C9orf72 ALS patient spinal cord tissues. Accumulation of endogenous DNA damage is concomitant with defective ATM-mediated DNA repair signaling and accumulation of protein-linked DNA breaks. We reveal that defective ATM-mediated DNA repair is a consequence of P62 accumulation, which impairs H2A ubiquitylation and perturbs ATM signaling. Virus-mediated expression of C9orf72-related RNA and dipeptide repeats in the mouse central nervous system increases double strand breaks and ATM defects and triggers neurodegeneration. These findings identify R-loops, double strand breaks and defective ATM-mediated repair as pathological consequences of C9orf72 expansions and suggest that C9orf72-linked neurodegeneration is driven at least partly by genomic instability.