Formaldehyde is a common environmental pollutant and is associated with adverse health effects. Formaldehyde is also considered to be a carcinogen because it can form DNA adducts, leading to genomic instability. How these adducts are prevented and removed is not fully understood. In this study, we used the fission yeast Schizosaccharomyces pombe as a model organism to investigate cellular tolerance pathways against formaldehyde exposure. We show that Fmd1 is a major formaldehyde dehydrogenase that functions to detoxify formaldehyde and that Fmd1 is critical to minimize formaldehyde-mediated DNA lesions. Our investigation revealed that nucleotide excision repair and homologous recombination have major roles in cellular tolerance to formaldehyde, while mutations in the Fanconi anemia, translesion synthesis, and base excision repair pathways also render cells sensitive to formaldehyde. We also demonstrate that loss of Wss1 or Wss2, proteases involved in the removal of DNA-protein crosslinks, sensitizes cells to formaldehyde and leads to replication defects. These results suggest that formaldehyde generates a variety of DNA lesions, including interstrand crosslinks, DNA-protein crosslinks, and base adducts. Thus, our genetic studies provide a framework for future investigation regarding health effects resulting from formaldehyde exposure.