DNA double-strand breaks (DSB) elicit a ubiquitylation cascade that controls DNA repair pathway choice. This cascade involves the ubiquitylation of histone H2A by the RNF168 ligase and the subsequent recruitment of RIF1, which suppresses homologous recombination (HR) in G1 cells. The RIF1-dependent suppression is relieved in S/G2 cells, allowing PALB2-driven HR to occur. With the inhibitory impact of RIF1 relieved, it remains unclear how RNF168-induced ubiquitylation influences HR. Here, we uncover that RNF168 links the HR machinery to H2A ubiquitylation in S/G2 cells. We show that PALB2 indirectly recognizes histone ubiquitylation by physically associating with ubiquitin-bound RNF168. This direct interaction is mediated by the newly identified PALB2-interacting domain (PID) in RNF168 and the WD40 domain in PALB2, and drives DNA repair by facilitating the assembly of PALB2-containing HR complexes at DSBs. Our findings demonstrate that RNF168 couples PALB2-dependent HR to H2A ubiquitylation to promote DNA repair and preserve genome integrity.