Trex1 is the major 3′ DNA exonuclease in mammalian cells, and mutations in the human TREX1 gene can cause Aicardi-Goutières syndrome, characterized by perturbed immunity. Similarly, Trex1^−/− mice have an autoinflammatory phenotype; however, the mechanism of Trex1-deficient disease is unknown. We report that Trex1, ordinarily associated with the endoplasmic reticulum (ER), relocalizes to the S phase nucleus after γ irradiation or hydroxyurea treatment. Notably, Trex1-deficient cells show defective G1/S transition and chronic ATM-dependent checkpoint activation, even in the absence of exogenous stress, correlating with persistent single-stranded DNA molecules produced in S phase, which accumulate in the ER. Our data indicate that Trex1 acts on a single-stranded DNA polynucleotide species generated from processing of aberrant replication intermediates to attenuate DNA damage checkpoint signaling and prevent pathological immune activation.