Marek's disease virus (MDV) is a highly contagious alphaherpesvirus that infects chickens and causes a deadly neoplastic disease. We previously demonstrated that MDV infection arrests cells in S-phase and that the tegument protein VP22 plays a major role in this process. In addition, expression of VP22 induces double strand breaks (DSB) in the cellular DNA, suggesting that DNA damage and the associated cellular response might be favorable for the MDV lifecycle. Here, we addressed the role of DNA damage in MDV replication and pathogenesis. We demonstrated that MDV induces DSB during lytic infection in vitro and in the PBMCs of infected animals. Intriguingly, we did not observe DNA damage in latently infected MDV-induced lymphoblastoid cells, while MDV reactivation resulted in the onset of DNA lesions, suggesting that DNA damage and/or the resulting DNA damage response might be required for efficient MDV replication and reactivation. In addition, reactivation was significantly enhanced by the induction of DNA damage using a number of chemicals. Finally, we used recombinant viruses to show that VP22 is required for the induction of DNA damage in vivo and that this likely contributes to viral oncogenesis. IMPORTANCE Marek's Disease Virus is an oncogenic alphaherpesvirus that causes fatal T-cell lymphomas in chickens. MDV causes substantial losses in poultry industry and is also used as a small-animal model for virus-induced tumor formation. DNA damage is not only implicated in tumor development but also aids in the life cycle of several viruses, however its role in MDV replication, latency and reactivation remains elusive. Here, we demonstrated that MDV induces DNA lesions during lytic replication in vitro and in vivo. DNA damage was not observed in latently infected cells, however is reinitiated during reactivation. Reactivation was significantly enhanced by the induction of DNA damage. Recombinant viruses that lacked the ability to induced DNA damage were defective in the induction of tumors, suggesting that DNA damage might also contribute to cellular transformation processes leading to MDV-lymphomagenesis.