Telomerase is a ribonucleoprotein reverse transcriptase that extends the ends of chromosomes. The two telomerase subunits essential for catalysis in vitro are the telomerase reverse transcriptase (TERT) and the telomerase RNA. Using truncations and site-specific mutations, we identified sequence elements of TERT and telomerase RNA required for catalytic activity and protein-RNA interaction for Tetrahymena thermophila telomerase. We found that the TERT amino and carboxyl termini, although evolutionarily poorly conserved, are nonetheless important for catalytic activity. In contrast, high-affinity telomerase RNA binding requires only a small region in the amino terminus of TERT. Surprisingly, the TERT region necessary and sufficient for telomerase RNA binding is completely separable from the reverse transcriptase motifs. The minimal Tetrahymena TERT RNA binding domain contains two sequence motifs with ciliate-specific conservation and one TERT motif with conservation across all species. With human TERT, we demonstrate that a similar region within the TERT amino terminus is essential for human telomerase RNA binding as well. Finally, we defined the Tetrahymena telomerase RNA sequences that are essential for TERT interaction. We found that a four-nucleotide region 5' of the template is critical for TERT binding and that the 5' end of telomerase RNA is sufficient for TERT binding. Our results reveal at least one evolutionarily conserved molecular mechanism by which the telomerase reverse transcriptase is functionally specialized for obligate use of an internal RNA template.