Werner Syndrome (WS) is an autosomal recessive disease characterized by premature aging and chromosome instability. The protein involved in WS, WRN, is a RecQ-type helicase that also has exonuclease activity. WRN has been demonstrated to bind to a variety of other proteins, including RPA, DNA-PKcs, and TRF2, suggesting that WRN is involved in DNA replication, repair, recombination, and telomere maintenance. In culture, WS cells show premature senescence, which can be overcome by transfection with an expression vector containing the gene for the catalytic subunit of telomerase. However, telomerase expression does not eliminate chromosome instability in WS cells, which led to the proposal that telomere loss is not the cause of the high rate of chromosome rearrangements in WS cells. In the present study, we have investigated how a WRN protein containing a dominant-negative mutation (K577M-WRN) influences the stability of telomeres in a human tumor cell line expressing telomerase. The results demonstrate an increased rate of telomere loss and chromosome fusion in cells expressing K577M-WRN. Expression of K577M-WRN results in reduced levels of telomerase activity, however, the absence of detectable changes in average telomere length demonstrates that WRN-associated telomere loss results from stochastic events involving complete telomere loss or loss of telomere capping function. Thus, telomere loss can contribute to chromosome instability in cells deficient in WRN regardless of the expression of telomerase activity.