Alcohol consumption is associated with increased breast cancer risk; however, the underlying mechanisms that contribute to mammary tumor initiation and progression are unclear. Alcohol is known to induce oxidative stress and DNA damage; likewise, p53 is a critical modulator of the DNA repair pathway and ensures genomic integrity. p53 mutations are frequently detected in breast and other tumors. The impact of alcohol on p53 is recognized, yet the role of p53 in alcohol-induced mammary carcinogenesis remains poorly defined. In our study, we measured alcohol-mediated oxidative DNA damage in MCF-7 cells using 8-OHdG and p-H2AX foci formation assays. p53 activity and target gene expression after alcohol exposure were determined using p53 luciferase reporter assay, qPCR, and Western blotting. A mechanistic study delineating the role of p53 in DNA damage response and cell cycle arrest was based on isogenic MCF-7 cells stably transfected with control (MCF-7/Con) or p53-targeting siRNA (MCF-7/sip53), and MCF-7 cells that were pretreated with Nutlin-3 (Mdm2 inhibitor) to stabilize p53. Alcohol treatment resulted in significant DNA damage in MCF-7 cells, as indicated by increased levels of 8-OHdG and p-H2AX foci number. A p53-dependent signaling cascade was stimulated by alcohol-induced DNA damage. Moderate to high concentrations of alcohol (0.1–0.8% v/v) induced p53 activation, as indicated by increased p53 phosphorylation, reporter gene activity, and p21/Bax gene expression, which led to G0/G1 cell cycle arrest. Importantly, compared to MCF-7/Con cells, alcohol-induced DNA damage was significantly enhanced, while alcohol-induced p21/Bax expression and cell cycle arrest were attenuated in MCF-7/sip53 cells. In contrast, inhibition of p53 degradation via Nutlin-3 reinforced G0/G1 cell cycle arrest in MCF-7 control cells. Our study suggests that functional p53 plays a critical role in cellular responses to alcohol-induced DNA damage, which protects the cells from DNA damage associated with breast cancer risk.