Replication requires homologous recombination (HR) to stabilize and restart terminally arrested forks. HR-mediated fork processing requires single stranded DNA (ssDNA) gaps and not necessarily double strand breaks. We used genetic and molecular assays to investigate fork-resection and restart at dysfunctional, unbroken forks in Schizosaccharomyces pombe. Here, we report that fork-resection is a two-step process regulated by the non-homologous end joining factor Ku. An initial resection mediated by MRN-Ctp1 removes Ku from terminally arrested forks, generating ~110 bp sized gaps obligatory for subsequent Exo1-mediated long-range resection and replication restart. The mere lack of Ku impacts the processing of arrested forks, leading to an extensive resection, a reduced recruitment of RPA and Rad51 and a slower fork-restart process. We propose that terminally arrested forks undergo fork reversal, providing a single DNA end for Ku binding. We uncover a role for Ku in regulating end-resection of unbroken forks and in fine-tuning HR-mediated replication restart.