Epstein-Barr virus (EBV), an oncogenic herpesvirus that causes human malignancies, infects and immortalizes primary human B cells in vitro into indefinitely proliferating lymphoblastoid cell lines, which represent a model for EBV-induced tumorigenesis. The immortalization efficiency is very low, suggesting that an innate tumor suppressor mechanism is operative. We identify the DNA damage response (DDR) as a major component of the underlying tumor suppressor mechanism. EBV-induced DDR activation was not due to lytic viral replication, nor did the DDR marks colocalize with latent episomes. Rather, a transient period of EBV-induced hyperproliferation correlated with DDR activation. Inhibition of the DDR kinases ATM and Chk2 markedly increased transformation efficiency of primary B cells. Further, the viral latent oncoprotein EBNA3C was required to attenuate the EBV-induced DDR. We propose that heightened oncogenic activity in early cell divisions activates a growth-suppressive DDR that is attenuated by viral latency products to induce cell immortalization.