The expression of DNA-dependent protein kinase catalytic subunit (DNA-PKc) is highly variable in smokers and reduced enzyme activity has been associated with risk for lung cancer. An in vitro model of lung pre-malignancy was used to evaluate the role of double-strand break DNA repair capacity in transformation of hTERT/CDK4 immortalized human bronchial epithelial cells (HBECs) and reprograming of the epigenome. Here we show that knockdown of DNA-PKc to levels simulating haploinsufficiency dramatically reduced DNA repair capacity following challenge with bleomycin and significantly increased transformation efficiency of HBEC lines exposed weekly for 12 weeks to this radiomimetic. Transformed HBEC lines with wild type or knockdown of DNA-PKc showed altered expression of more than 1,000 genes linked to major cell regulatory pathways involved in lung cancer. While lung cancer driver mutations were not detected in transformed clones, more than 300 genes that showed reduced expression associated with promoter methylation in transformed clones or predictive for methylation in malignant tumors were identified. These studies support reduced DNA repair capacity as a key factor in the initiation and clonal expansion of pre-neoplastic cells and double-strand break DNA damage as causal for epigenetic mediated silencing of many lung cancer-associated genes. The fact that DNA damage, repair, and epigenetic silencing of genes are causal for many other cancers that include colon and prostate extends the generalizability and impact of these findings.