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The Sae2/CtIP protein is required for efficient processing of DNA double-strand breaks that initiate homologous recombination in eukaryotic cells. Sae2/CtIP is also important for survival of single-stranded Top1-induced lesions and CtIP is known to associate directly with transcription-associated complexes in mammalian cells. Here we investigate the role of Sae2/CtIP at single-strand lesions in budding yeast and in human cells and find that depletion of Sae2/CtIP promotes the accumulation of stalled RNA polymerase and RNA-DNA hybrids at sites of highly expressed genes. Overexpression of the RNA-DNA helicase Senataxin suppresses DNA damage sensitivity and R-loop accumulation in Sae2/CtIP-deficient cells, and a catalytic mutant of CtIP fails to complement this sensitivity, indicating a role for CtIP nuclease activity in the repair process. Based on this evidence, we propose that R-loop processing by 5’ flap endonucleases is a necessary step in the stabilization and removal of nascent R-loop initiating structures in eukaryotic cells.