The replication checkpoint kinase Cds1 preserves genome integrity by stabilizing stalled replication forks. Cds1 targets substrates through its FHA domain. The Cds1 FHA domain interacts with Mus81, a subunit of the Mus81-Eme1 structure-specific endonuclease. We report here that Mus81 and Rhp51 are required for generating deletion mutations in fission yeast replication mutants that experience replication stress. A mutation in the Mus81 FHA-binding motif eliminates its Cds1-binding and Cds1-dependent phosphorylation. Furthermore, this mutation exacerbates the deletion mutator phenotype of a replication mutant, and induces a hyper-recombination phenotype in hydroxyurea-treated cells. In unperturbed cells, Mus81 associates with chromatin throughout S phase. In replication mutants grown at semipermissive temperature, Mus81 undergoes minor Cds1-dependent phosphorylation, remains chromatin-associated, generates deletion mutations, and maintains cell growth. Upon S-phase arrest by acute hydroxyurea treatment, Mus81 is not required for cell viability but is essential for recovery from replication fork collapse. Moreover, Mus81 undergoes extensive Cds1-dependent phosphorylation and dissociates from chromatin in hydroxyurea-arrested cells, thereby preventing it from cleaving stalled replication forks that could lead to fork breakage and chromosomal rearrangement. These results provide novel insights into how Cds1 regulates Mus81 accordingly when cells experience different replication stress to preserve genome integrity.