BRCA1 or BRCA2 germline mutations predispose to breast, ovarian and other cancers. High-throughput sequencing of tumour genomes revealed that oncogene amplification and BRCA1/2 mutations are mutually exclusive in cancer, however the molecular mechanism underlying this incompatibility remains unknown. Here, we report that activation of β-catenin, an oncogene of the WNT signalling pathway, inhibits proliferation of BRCA1/2-deficient cells. RNA-seq analyses revealed β-catenin-induced discrete transcriptome alterations in BRCA2-deficient cells, including suppression of CDKN1A gene encoding the CDK inhibitor p21. This accelerates G1/S transition, triggering illegitimate origin firing and DNA damage. In addition, β-catenin activation accelerates replication fork progression in BRCA2-deficient cells, which is critically dependent on p21 downregulation. Importantly, we find that upregulated p21 expression is essential for the survival of BRCA2-deficient cells and tumours. Thus, our work demonstrates that β-catenin toxicity in cancer cells with compromised BRCA1/2 function is driven by transcriptional alterations that cause aberrant replication and inflict DNA damage.