Inactivation of the DNA mismatch repair pathway manifests as microsatellite instability, an accumulation of mutations that drives carcinogenesis. Here, we determined whether microsatellite instability in acute myeloid leukemia and myelodysplastic syndrome correlated with chromosomal instability and poly (ADP-ribose) polymerase (PARP) inhibitor sensitivity through disruption of DNA repair function. Acute myeloid leukemia cell lines (n=12) and primary cell samples (n=18), and bone marrow mononuclear cells from high-risk myelodysplastic syndrome patients (n=63) were profiled for microsatellite instability using fluorescent fragment polymerase chain reaction. PARP inhibitor sensitivity was performed using cell survival, annexin V staining and cell cycle analysis. Homologous recombination was studied using immunocytochemical analysis. SNP karyotyping was used to study chromosomal instability. RNA silencing, Western blotting and gene expression analysis was used to study the functional consequences of mutations. Acute myeloid leukemia cell lines (4 of 12, 33%) and primary samples (2 of 18, 11%) exhibited microsatellite instability with mono-allelic mutations in CtIP and MRE11. These changes were associated with reduced expression of mismatch repair pathway components, MSH2, MSH6 and MLH1. Both microsatellite instability positive primary acute myeloid leukemia samples and cell lines demonstrated a downregulation of homologous recombination DNA repair conferring marked sensitivity to PARP inhibitors. Similarly, bone marrow mononuclear cells from 11 of 56 (20%) patients with de novo high-risk myelodysplastic syndrome exhibited microsatellite instability. Significantly, all 11 patients with microsatellite instability had cytogenetic abnormalities with 4 of them (36%) possessing a mono-allelic microsatellite mutation in CtIP. Furthermore, 50% reduction in CtIP expression by RNA silencing also down-regulated homologous recombination DNA repair responses conferring PARP inhibitor sensitivity, whilst CtIP differentially regulated the expression of homologous recombination modulating RecQ helicases, WRN and BLM. In conclusion, microsatellite instability dependent mutations in DNA repair genes, CtIP and MRE11 are detected in myeloid malignancies conferring hypersensitivity to PARP inhibitors. Microsatellite instability is significantly correlated with chromosomal instability in myeloid malignancies.