The role of the discontinuity of the exchange-correlation potential of density functional theory is studied in the context of electron transport and shown to be intimately related to Coulomb blockade. By following the time evolution of an interacting nanojunction attached to biased leads, we find that, instead of evolving to a steady state, the system reaches a dynamical state characterized by correlation-induced current oscillations. Our results establish a dynamical picture of Coulomb blockade manifesting itself as a periodic sequence of charging and discharging of the nanostructure.