Telomerase is a specialized reverse transcriptase that adds GGTTAG repeats to chromosome ends and is upregulated in most human cancers to enable limitless proliferation. Here, we uncover two distinct mechanisms by which naturally occurring oxidized dNTPs and therapeutic dNTPs inhibit telomerase-mediated telomere elongation. We conduct a series of direct telomerase extension assays in the presence of modified dNTPs on various telomeric substrates. We provide direct evidence that telomerase can add the nucleotide reverse transcriptase inhibitors ddITP and AZT-TP to the telomeric end, causing chain termination. In contrast, telomerase continues elongation after inserting oxidized 2-OH-dATP or therapeutic 6-thio-dGTP, but insertion disrupts translocation and inhibits further repeat addition. Kinetics reveal that telomerase poorly selects against 6-thio-dGTP, inserting with similar catalytic efficiency as dGTP. Furthermore, telomerase processivity factor POT1-TPP1 fails to restore processive elongation in the presence of inhibitory dNTPs. These findings reveal mechanisms for targeting telomerase with modified dNTPs in cancer therapy.