Rapid phosphorylation of histone variant H2AX proximal to DNA breaks is an initiating event and a hallmark of eukaryotic DNA damage responses. Three mammalian kinases are known to phosphorylate H2AX in response to DNA damage. However, the mechanism(s) for damage-localized phosphorylation remains incompletely understood. The DNA-dependent protein kinase (DNA-PK) is the most abundant H2AX-modifying kinases and uniquely activated by binding DNA termini. Here, we have developed a novel approach to examine enzyme activity and substrate properties by executing biochemical assays on intact cellular structures. We apply this approach to examine the mechanisms of localized protein modification in chromatin within fixed cells. DNA-PK retains substrate specificity and independently generates break-localized γH2AX foci in chromatin.In situDNA-PK activity recapitulates localization and intensity ofin vivoH2AX phosphorylation and requires no active cellular processes. Nuclease treatments or addition of exogenous DNA resulted in genome-wide H2AX phosphorylation, showing that DNA termini dictated the locality of H2AX phosphorylationin situ.DNA-PK also reconstituted focal phosphorylation of structural maintenance of chromatin protein 1, but not activating transcription factor 2. Allosteric regulation of DNA-PK by DNA termini protruding from chromatin constitutes an autonomous mechanism for break-localized protein phosphorylation that generates sub-nuclear foci. We discuss generalized implications of this mechanism in localizing mammalian DNA damage responses.