Site-specific genome engineering technologies are increasingly important tools in the postgenomic era, where biotechnological objectives often require organisms with precisely modified genomes. Rare-cutting endonucleases, through their capacity to create a targeted DNA strand break, are one of the most promising of these technologies. However, realizing the full potential of nuclease-induced genome engineering requires a detailed understanding of the variables that influence resolution of nuclease-induced DNA breaks. Here we present a genome engineering reporter system, designated 'traffic light', that supports rapid flow-cytometric analysis of repair pathway choice at individual DNA breaks, quantitative tracking of nuclease expression and donor template delivery, and high-throughput screens for factors that bias the engineering outcome. We applied the traffic light system to evaluate the efficiency and outcome of nuclease-induced genome engineering in human cell lines and identified strategies to facilitate isolation of cells in which a desired engineering outcome has occurred.