Mitotic spindle assembly is crucial for chromosome segregation and relies on bundles of microtubules that extend from the poles and overlap in the middle. However, how these structures form remains poorly understood. Here we show that overlap bundles arise through a network-to-bundles transition driven by kinetochores and chromosomes. STED super-resolution microscopy reveals that PRC1-crosslinked microtubules initially form loose arrays, which become rearranged into bundles. Kinetochores promote microtubule bundling by lateral binding via CENP-E/kinesin-7 in an Aurora B-regulated manner. Steric interactions between the bundle-associated chromosomes at the spindle midplane drive bundle separation and spindle widening. In agreement with experiments, theoretical modeling suggests that bundles arise through competing attractive and repulsive mechanisms. Finally, perturbation of overlap bundles leads to inefficient correction of erroneous kinetochore-microtubule attachments. Thus, kinetochores and chromosomes drive coarsening of a uniform microtubule array into overlap bundles, which promote not only spindle formation but also chromosome segregation fidelity.