Poly(ADP-ribose)polymerase 1 (PARP-1) is a key eukaryotic stress sensor that responds in seconds to DNA single-strand breaks (SSBs), the most frequent genomic damage. A burst of poly(ADP-ribose) synthesis initiates DNA damage response, whereas PARP-1 inhibition kills BRCA-deficient tumor cells selectively, providing the first anti-cancer therapy based on synthetic lethality. However, the mechanism underlying PARP-1's function remained obscure; inherent dynamics of SSBs and PARP-1's multi-domain architecture hindered structural studies. Here we reveal the structural basis of SSB detection and how multi-domain folding underlies the allosteric switch that determines PARP-1's signaling response. Two flexibly linked N-terminal zinc fingers recognize the extreme deformability of SSBs and drive co-operative, stepwise self-assembly of remaining PARP-1 domains to control the activity of the C-terminal catalytic domain. Automodifcation in cis explains the subsequent release of monomeric PARP-1 from DNA, allowing repair and replication to proceed. Our results provide a molecular framework for understanding PARP inhibitor action and, more generally, allosteric control of dynamic, multi-domain proteins.