Mitochondria are dynamic organelles that play essential roles in cell growth and survival in eukaryotes. Two key processes of fission and fusion control distribution and segregation of mitochondria and its genome. They also contribute to mitochondrial quality control (thereby ensuring mitochondrial function) and regulate mtDNA copy numbers and integrity. Recent work has begun to elucidate the importance of mitochondrial organization for mtDNA maintenance. In contrast, the impact of mtDNA perturbations on mitochondrial dynamics and organellar maintenance remains less understood. To address this, we develop a tool to induce mitochondria-specific DNA damage, using a mitochondrial-targeted base modifying bacterial toxin, DarT. Following damage induction, we ob-serve dynamic reorganization of the mitochondrial network. We find that mtDNA damage predominantly affects rates of fusion, likely driven by mitochondrial dysfunction arising due to DNA dam-age. Changes in network organization are associated with mtDNA loss, independent of previously implicated pathways for defective mtDNA clearance (mitophagy or replicative polymerase, MIP1, exonuclease activity). Unexpectedly, we find that perturbation to mtDNA degradation function of MIP1 increases the rate of mtDNA loss. Our data suggest that, during cell division, the segregation of mtDNA and organelle can be de-coupled under damage, in conditions where mtDNA is dispensable (for example, in fermentable carbon sources). Such clearance of damaged DNA facilitates cellular adaptation to a metabolic state with mtDNA-independent mitochondrial function, thus enabling cell growth. Together, our works reveals new insights into an intricate relationship between mitochondrial genome maintenance and function, that can act as a modulator of mitochondrial organization and segregation.