Telomerase is a specialized reverse transcriptase that contains its own RNA template for synthesis of telomeric DNA [Greider, C. W., & Blackburn, E. H. (1989) Nature 337, 331-337; Shippen-Lentz, D., & Blackburn, E. H. (1990) Science 247, 546-552]. The activity of this ribonucleoprotein enzyme has been associated with cancer cells [Kim et al. (1994) Science 266, 2011-2015] and is thus a potential target for anticancer chemotherapy. Telomeric DNA.RNA hybrids are important intermediates in telomerase function and form after extension of the growing telomere on the telomerase RNA template. Translocation is a critical step in telomerase function and consists of unwinding of the telomeric DNA.telomerase RNA hybrid followed by repositioning of the 3'-end of the extended telomere. A central question in telomerase function is how translocation of the extended telomere occurs in the absence of ATP or GTP. It has been hypothesized that unwinding of the telomeric hybrid may be facilitated by the formation of stable hairpins or G-quadruplexes by the telomere product (i.e., a hybrid to G-quadruplex transition) and that this may provide at least part of the driving force for translocation [Shippen-Lentz & Blackburn, 1990; Zahler et al. (1991) Nature 350, 718-720]. However, so far there has been no effort aimed at examining the possibility that a hybrid/G-quadruplex equilibrium can occur and to what extent this equilibrium depends on buffer and concentration conditions. Examination of these transitions may provide insight into telomerase function and may also provide clues for the development of anti-telomerase agents. Using a model system consisting of the DNA.RNA hybrid d(GGTTAGGGTTAG).r(cuaacccuaacc), we present evidence that a thermally induced transition of telomeric DNA.RNA hybrid to G-quadruplex can occur under certain conditions. These results provide support for the hypothesis that G-quadruplex formation by the telomere product may in fact regulate telomerase function at the translocation step (Zahler et al., 1991) and suggest an Achilles' heel for indirectly targeting telomerase. Thus, on the basis of the insight gained from the present studies and the results of Zahler et al. (1991), we propose that ligands that selectively bind or cleave G-quadruplex structures may modulate telomerase processivity.