A striking proportion of human cleavage-stage embryos exhibit chromosome instability (CIN). Notably, until now, no experimental model has been described to determine the origin and mechanisms of complex chromosomal rearrangements. Here, we examined mouse embryos deficient for the chromatin remodeling protein ATRX to determine the cellular mechanisms activated in response to CIN. We demonstrate that ATRX is required for silencing of major satellite transcripts in the maternal genome, where it confers epigenetic asymmetry to pericentric heterochromatin during the transition to the first mitosis. This stage is also characterized by a striking kinetochore size asymmetry established by differences in CENP-C protein between the parental genomes. Loss of ATRX results in increased centromeric mitotic recombination, a high frequency of sister chromatid exchanges and double strand DNA breaks, indicating the formation of mitotic recombination break points. ATRX-deficient embryos exhibit a twofold increase in transcripts for aurora kinase B, the centromeric cohesin ESCO2, DNMT1, the ubiquitin-ligase (DZIP3) and the histone methyl transferase (EHMT1). Thus, loss of ATRX activates a pathway that integrates epigenetic modifications and DNA repair in response to chromosome breaks. These results reveal the cellular response of the cleavage-stage embryo to CIN and uncover a mechanism by which centromeric fission induces the formation of large-scale chromosomal rearrangements. Our results have important implications to determine the epigenetic origins of CIN that lead to congenital birth defects and early pregnancy loss, as well as the mechanisms involved in the oocyte to embryo transition.