RNase H2 is a specialized enzyme that degrades RNA in RNA/DNA hybrids and deficiency of this enzyme causes a severe neuroinflammatory disease, Aicardi Goutières syndrome (AGS). However, the molecular mechanism underlying AGS is still unclear. Here, we show that RNase H2 is associated with a subset of genes, in a transcription-dependent manner where it interacts with RNA Polymerase II. RNase H2 depletion impairs transcription leading to accumulation of R-loops, structures that comprise RNA/DNA hybrids and a displaced DNA strand, mainly associated with short and intronless genes. Importantly, accumulated R-loops are processed by XPG and XPF endonucleases which leads to DNA damage and activation of the immune response, features associated with AGS. Consequently, we uncover a key role for RNase H2 in the transcription of human genes by maintaining R-loop homeostasis. Our results provide insight into the mechanistic contribution of R-loops to AGS pathogenesis.