Fanconi Anemia (FA) is a rare, genome instability-associated disease characterized by a deficiency in repairing DNA crosslinks, which are known to perturb several cellular processes, including DNA transcription, replication, and repair. Formaldehyde, a by-product of metabolism, is thought to drive FA by generating DNA interstrand crosslinks (ICLs) and DNA-protein crosslinks (DPCs). However, the impact of formaldehyde on global cellular pathways has not been investigated thoroughly. Herein, using a pangenomic CRISPR-Cas9 screen, we identify EXO1 as a critical regulator of formaldehyde-induced DNA lesions. We show that EXO1 knockout cell lines exhibit formaldehyde sensitivity leading to the accumulation of replicative stress, DNA double-strand breaks, and quadriradial chromosomes, a typical feature of FA. After formaldehyde exposure, EXO1 is recruited to chromatin, protects DNA replication forks from degradation, and functions in parallel with the FA pathway to promote cell survival. In vitro, EXO1-mediated exonuclease activity is proficient in removing DPCs. Collectively, we show that EXO1 limits replication stress and DNA damage to counteract formaldehyde-induced genome instability.