When exposed to genotoxic stress, eukaryotic cells demonstrate a DNA damage response with delay or arrest of cell-cycle progression, providing time for DNA repair. Induction of the Epstein-Barr virus (EBV) lytic program elicited a cellular DNA damage response, with activation of the ataxia telangiectasia-mutated (ATM) signal transduction pathway. Activation of the ATM-Rad3-related (ATR) replication checkpoint pathway, in contrast, was minimal. The DNA damage sensor Mre11-Rad50-Nbs1 (MRN) complex and phosphorylated ATM were recruited and retained in viral replication compartments, recognizing newly synthesized viral DNAs as abnormal DNA structures. Phosphorylated p53 also became concentrated in replication compartments and physically interacted with viral BZLF1 protein. Despite the activation of ATM checkpoint signaling, p53-downstream signaling was blocked, with rather high S-phase CDK activity associated with progression of lytic infection. Therefore, although host cells activate ATM checkpoint signaling with response to the lytic viral DNA synthesis, the virus can skillfully evade this host checkpoint security system and actively promote an S-phase-like environment advantageous for viral lytic replication.