Abstract ADP-ribosylation is an important posttranslational protein modification that regulates diverse biological processes, controlled by dedicated transferases and hydrolases. Here, we show that frequent deletions (∼30%) of the MACROD2 mono-ADP-ribosylhydrolase locus in human colorectal cancer cause impaired PARP1 transferase activity in a gene dosage–dependent manner. MACROD2 haploinsufficiency alters DNA repair and sensitivity to DNA damage and results in chromosome instability. Heterozygous and homozygous depletion of Macrod2 enhances intestinal tumorigenesis in ApcMin/+ mice and the growth of human colorectal cancer xenografts. MACROD2 deletion in sporadic colorectal cancer is associated with the extent of chromosome instability, independent of clinical parameters and other known genetic drivers. We conclude that MACROD2 acts as a haploinsufficient tumor suppressor, with loss of function promoting chromosome instability, thereby driving cancer evolution. Significance: Chromosome instability (CIN) is a hallmark of cancer. We identify MACROD2 deletion as a cause of CIN in human colorectal cancer. MACROD2 loss causes repression of PARP1 activity, impairing DNA repair. MACROD2 haploinsufficiency promotes CIN and intestinal tumor growth. Our results reveal MACROD2 as a major caretaker tumor suppressor gene. Cancer Discov; 8(8); 988–1005. ©2018 AACR. See related commentary by Jin and Burkard, p. 921. This article is highlighted in the In This Issue feature, p. 899