In human cells DNA double strand breaks (DSBs) can be repaired by the non-homologous end-joining (NHEJ) pathway. In a background of NHEJ deficiency, DSBs with mismatched ends can be joined by an error-prone mechanism involving joining between regions of nucleotide microhomology. The majority of joins formed from a DSB with partially incompatible 3′ overhangs by cell-free extracts from human glioblastoma (MO59K) and urothelial (NHU) cell lines were accurate and produced by the overlap/fill-in of mismatched termini by NHEJ. However, repair of DSBs by extracts using tissue from four high-grade bladder carcinomas resulted in no accurate join formation. Junctions were formed by the non-random deletion of terminal nucleotides and showed a preference for annealing at a microhomology of 8 nt buried within the DNA substrate; this process was not dependent on functional Ku70, DNA-PK or XRCC4. Junctions were repaired in the same manner in M059K extracts in which accurate NHEJ was inactivated by inhibition of Ku70 or DNA-PKcs. These data indicate that bladder tumour extracts are unable to perform accurate NHEJ such that error-prone joining predominates. Therefore, in high-grade tumours mismatched DSBs are repaired by a highly mutagenic, microhomology-mediated, alternative end-joining pathway, a process that may contribute to genomic instability observed in bladder cancer.