In Schizosaccharomyces pombe, topoisomerase III is encoded by a single gene, top3(+), which is essential for cell viability and proper chromosome segregation. Deletion of rqh1(+), which encodes the sole RecQ family helicase in S. pombe, suppresses the lethality caused by loss of top3. Here, we provide evidence suggesting that the lethality in top3 mutants is due to accumulation of aberrant DNA structures that arise during S phase, as judged by pulsed-field gel electrophoresis. Using a top3 shut-off strain, we show here that depletion of Top3 activates the DNA damage checkpoint associated with phosphorylation of the checkpoint kinase Chk1. Despite activation of this checkpoint, top3 cells exit the arrest but fail to undergo faithful chromosome segregation. However, these mitotic defects are secondary to chromosomal abnormalities that lead to the lethality, because advance into mitosis did not adversely affect cell survival. Furthermore, top3 function is required for maintenance of nucleolar structure, possibly due to its ability to prevent recombination at the rDNA loci. Our data are consistent with the notion that Top3 has a key function in homologous recombinational repair during S phase that is essential for ensuring subsequent fidelity of chromosome segregation.