At blocked replication forks, homologous recombination mediates the nascent strands to switch template in order to ensure replication restart, but faulty template switches underlie genome rearrangements in cancer cells and genomic disorders. Recombination occurs within DNA packaged into chromatin that must first be relaxed and then restored when recombination is completed. The chromatin assembly factor 1, CAF-1, is a histone H3-H4 chaperone involved in DNA synthesis-coupled chromatin assembly during DNA replication and DNA repair. We reveal a novel chromatin factor-dependent step during replication-coupled DNA repair: Fission yeast CAF-1 promotes Rad51-dependent template switches at replication forks, independently of the postreplication repair pathway. We used a physical assay that allows the analysis of the individual steps of template switch, from the recruitment of recombination factors to the formation of joint molecules, combined with a quantitative measure of the resulting rearrangements. We reveal functional and physical interplays between CAF-1 and the RecQ-helicase Rqh1, the BLM homologue, mutations in which cause Bloom's syndrome, a human disease associating genome instability with cancer predisposition. We establish that CAF-1 promotes template switch by counteracting D-loop disassembly by Rqh1. Consequently, the likelihood of faulty template switches is controlled by antagonistic activities of CAF-1 and Rqh1 in the stability of the D-loop. D-loop stabilization requires the ability of CAF-1 to interact with PCNA and is thus linked to the DNA synthesis step. We propose that CAF-1 plays a regulatory role during template switch by assembling chromatin on the D-loop and thereby impacting the resolution of the D-loop.