It is important to understand how p53 suppresses tumorigenesis. P53 activity contributes to many instances of cell competition in mammals. This has not been seen for Drosophila p53, where the transcription factor Xrp1 is an effector of cell competition. Xrp1 is induced in a p53-dependent manner by DNA damage, and we report that Xrp1 mediates multiple functions of p53 in the DNA damage response, contributing to p53-dependent gene transcription and DNA damage-induced apoptosis. Differences in either Xrp1 or p53 activity, occurring between wild type and mutant cells experiencing mild genotoxic stress, both resulted in cell competition. Unexpectedly, cell competition due to differential p53 activity did not require Xrp1 but instead was restrained by Xrp1. We show that Xrp1 has a p53-independent role in removing genomically-altered cells. Both Xrp1 and p53 limit the accumulation of abnormal cells that results from genotoxicity, and we propose that genomic alterations enhance cellular growth of p53 mutant cells and promote cell competition, potentially contributing to the tumorigenesis in p53 mutants.