Tumors with defective mismatch repair (dMMR) are responsive to immunotherapy because of dMMR-induced neoantigens and activation of the cGAS-STING pathway. While neoantigens result from the hypermutable nature of dMMR, it is unknown how dMMR activates the cGAS-STING pathway. We show here that loss of the MutLα subunit MLH1, whose defect is responsible for ~50% of dMMR cancers, results in loss of MutLα-specific regulation of exonuclease 1 (Exo1) during DNA repair. This leads to unrestrained DNA excision by Exo1, which causes increased single-strand DNA formation, RPA exhaustion, DNA breaks, and aberrant DNA repair intermediates. Ultimately, this generates chromosomal abnormalities and the release of nuclear DNA into the cytoplasm, activating the cGAS-STING pathway. In this study, we discovered a hitherto unknown MMR mechanism that modulates genome stability and has implications for cancer therapy. Display omitted •MLH1 deficiency triggers cytosolic DNA release and activates the cGAS-STING pathway•MLH1 regulates Exo1 nuclease activity during DNA end resection•Loss of MLH1 leads to DNA hyperexcision, RPA exhaustion, and chromosomal instability The mechanism by which mismatch repair deficiency benefits immunotherapy is unclear. Guan et al. show that mismatch repair protein MLH1 controls Exo1 nuclease activity during DNA repair, and loss of MLH1 causes DNA hyperexcision, leading to chromosomal instability and cytosolic DNA accumulation. This activates the cGAS-STING pathway to facilitate immunotherapy.