Over the past few years, study of the rare inherited chromosome instability disorder, Fanconi Anemia (FA), has uncovered a novel DNA damage response pathway. Through the cooperation of multiple proteins, this pathway regulates a complicated cellular response to DNA cross-linking agents and other genotoxic stresses. In this article we review recent data identifying new components of the FA pathway that implicate it in several aspects of the DNA damage response, including the direct processing of DNA, translesion synthesis, homologous recombination, and cell cycle regulation. We also discuss new findings that explain how the FA pathway is regulated through the processes of ubiquitination and deubiquitination. We then consider the clinical implications of our current understanding of the FA pathway, particularly in the development and treatment of malignancy in heterozygous carriers of FA mutations or in patients with sporadic cancers. We consider how recent studies of p53-mediated apoptosis and loss of p53 function in models of FA may help explain the clinical features of the disease and finally present a hypothesis to account for the specificity of the FA pathway in the response to DNA cross-links.