p53 plays a central role in tumor suppression. It does so by inducing anti-proliferative processes as a response to various tumor-promoting stresses. p53 is regulated by the ubiquitin ligase Mdm2. The optimal function of Mdm2 requires Daxx, which stabilizes Mdm2 through the deubiquitinase Hausp/USP7 and also directly promotes Mdm2's ubiquitin ligase activity towards p53. The Daxx-Mdm2 interaction is disrupted upon DNA damage. However, both the mechanisms and the consequence of the Daxx-Mdm2 dissociation are not understood. Here we show that upon DNA damage Daxx is phosphorylated in a manner that is dependent on ATM, a member of the PI 3-kinase family that orchestrates the DNA damage response. The main phosphorylation site of Daxx is identified to be Ser564, which is a direct target of ATM. Phosphorylation of endogenous Daxx at Ser564 occurs rapidly during the DNA damage response and precedes p53 activation. Blockage of this phosphorylation event prevents the separation of Daxx from Mdm2, stabilizes Mdm2, and inhibits DNA damage-induced p53 activation. These results suggest that phosphorylation of Daxx by ATM upon DNA damage disrupts the Daxx-Mdm2 interaction and facilitates p53 activation.