Ectopic expression of telomerase in telomerase-silent cells is sufficient to overcome senescence and to extend cellular lifespan. We show here that the catalytic subunit of human telomerase (hTERT) crosslinks telomeres. This interaction is blocked by the telomere repeat binding factor 1, but not by a dominant negative form of this protein. It is also abolished by destruction of the RNA component of telomerase as well as by mutations in the hTERT protein. Ectopic expression of hTERT leads to transcriptional alterations of a subset of genes and changes in the interaction of the telomeres with the nuclear matrix. This is associated with reduction of spontaneous chromosome damage in G(1) cells, enhancement of the kinetics of DNA repair and an increase in NTP levels. The effect on DNA repair is likely indirect as TERT does not directly affect DNA end rejoining in vitro or meiotic recombination in vivo. The observed effects of hTERT occurred rapidly before any significant lengthening of telomeres was observed. Our findings establish an intimate relationship between hTERT-telomere interactions and alteration in transcription of a subset of genes that may lead to increased genomic stability and enhanced repair of genetic damage. These novel functions of telomerase are distinct from its known effect on telomere length and have potentially important biological consequences.