Targeted DNA double-strand breaks (DSBs) with CRISPR-Cas9 have revolutionized genetic modification by enabling efficient genome editing in a broad range of eukaryotic systems. Accurate gene editing is possible with near-perfect efficiency in haploid or (predominantly) homozygous genomes. However, genomes exhibiting polyploidy and/or high degrees of heterozygosity are less amenable to genetic modification. Here, we report an up to 99-fold lower gene editing efficiency when editing individual heterozygous loci in the yeast genome. Moreover, Cas9-mediated introduction of a DSB resulted in large scale loss of heterozygosity affecting DNA regions up to 360 kb and up to 1700 heterozygous nucleotides, due to replacement of sequences on the targeted chromosome by corresponding sequences from its non-targeted homolog. The observed patterns of loss of heterozygosity were consistent with homology directed repair. The extent and frequency of loss of heterozygosity represent a novel mutagenic side-effect of Cas9-mediated genome editing, which would have to be taken into account in eukaryotic gene editing. In addition to contributing to the limited genetic amenability of heterozygous yeasts, Cas9-mediated loss of heterozygosity could be particularly deleterious for human gene therapy, as loss of heterozygous functional copies of antiproliferative and pro-apoptotic genes is a known path to cancer.