Co-transcriptional RNA-DNA hybrids can not only cause DNA damage threatening genome integrity but also regulate gene activity in a mechanism that remains unclear. Here, we show that the nucleotide excision repair factor XPF interacts with the insulator binding protein CTCF and the cohesin subunits SMC1A and SMC3, leading to R-loop–dependent DNA looping upon transcription activation. To facilitate R-loop processing, XPF interacts and recruits with TOP2B on active gene promoters, leading to double-strand break accumulation and the activation of a DNA damage response. Abrogation of TOP2B leads to the diminished recruitment of XPF, CTCF, and the cohesin subunits to promoters of actively transcribed genes and R-loops and the concurrent impairment of CTCF-mediated DNA looping. Together, our findings disclose an essential role for XPF with TOP2B and the CTCF/cohesin complex in R-loop processing for transcription activation with important ramifications for DNA repair–deficient syndromes associated with transcription-associated DNA damage.