The study of DNA double-strand break (DSB) repair has been greatly facilitated by the use of rare-cutting endonucleases, which induce a break precisely at their cut sites that can be strategically placed in the genome. We previously established such a system in Drosophila and showed that the yeast I-SceI enzyme cuts efficiently in Drosophila cells and those breaks are effectively repaired by conserved mechanisms. In this study, we determined the genetic requirements for the repair of this I-SceI-induced DSB in the germline. We show that Drosophila Rad51 and Rad54 are both required for homologous repair by gene conversion, but are dispensable for single-strand annealing repair. We provided evidence suggesting that Rad51 is more stringently required than Rad54 for intersister gene conversion. We uncovered a significant role of DNA ligase IV in nonhomologous end joining. We conducted a screen for candidate mutations affecting DSB repair and discovered novel mutations in genes that include mutagen sensitive 206, single-strand annealing reducer, and others. In addition, we demonstrated an intricate balance among different repair pathways in which the cell differentially utilizes repair mechanisms in response to both changes in the genomic environment surrounding the break and deficiencies in one or the other repair pathways.