DNA double-strand breaks (DSBs) initiate extensive local and global alterations in chromatin structure, many of which depend on the ATM kinase. Histone H2A ubiquitylation (uH2A) on chromatin surrounding DSBs is one example, thought to be important for recruitment of repair proteins. uH2A is also implicated in transcriptional repression; an intriguing yet untested hypothesis is that this function is conserved in the context of DSBs. Using a novel reporter that allows for visualization of repair protein recruitment and local transcription in single cells, we describe an ATM-dependent transcriptional silencing program in cis to DSBs. ATM prevents RNA polymerase II elongation-dependent chromatin decondensation at regions distal to DSBs. Silencing is partially dependent on E3 ubiquitin ligases RNF8 and RNF168, whereas reversal of silencing relies on the uH2A deubiquitylating enzyme USP16. These findings give insight into the role of posttranslational modifications in mediating crosstalk between diverse processes occurring on chromatin.