The p97-Ufd1-Npl4 ATPase complex is associated with the response to DNA damage and replication stress, but how its inactivation leads to manifestation of chromosome instability is unclear. Here, we show that p97-Ufd1-Npl4 has an additional direct role in the G2/M checkpoint. Upon DNA damage, p97-Ufd1-Npl4 binds CDC25A downstream of ubiquitination by the SCF-betaTrCP ligase and facilitates its proteasomal degradation. Depletion of Ufd1-Npl4 leads to G2/M checkpoint failure due to persistent CDC25 activity and propagation of DNA damage into mitosis with deleterious effects on chromosome segregation. Thus, p97-Ufd1-Npl4 is an integral part of G2/M checkpoint signaling and thereby suppresses chromosome instability.