Genetic instability is a hallmark of cancer, and mutation hotspots in human cancer genomes co-localize with alternative DNA structure-forming sequences (e.g. H-DNA), implicating them in cancer etiology. H-DNA has been shown to stimulate genetic instability in mammals. Here, we demonstrate a new paradigm of genetic instability, where a cancer-associated H-DNA-forming sequence accumulates more oxidative lesions than B-DNA under conditions of oxidative stress (OS), often found in tumor microenvironments. We show that OS results in destabilization of the H-DNA structure and attenuates the fold increase in H-DNA-induced mutations over control B-DNA in mammalian cells. Furthermore, the mutation spectra revealed that the damaged H-DNA-containing region was processed differently compared to H-DNA in the absence of oxidative damage in mammalian cells. The oxidatively modified H-DNA elicits differential recruitment of DNA repair proteins from both the base excision repair and nucleotide excision repair mechanisms. Altogether, these results suggest a new model of genetic instability whereby H-DNA-forming regions are hotspots for DNA damage in oxidative microenvironments, resulting in its altered mutagenic processing. Our findings provide valuable insights into the role of OS in DNA structure-induced genetic instability and may establish H-DNA-forming sequences as promising genomic biomarkers and potential therapeutic targets for genetic diseases.