The MRN complex consists of the two evolutionarily conserved components Mre11 and Rad50 and the third less-conserved component Nbs1/Xrs2. This complex mediates telomere maintenance in addition to a variety of functions in response to DNA double-strand breaks, including homologous recombination, nonhomologous end joining (NHEJ), and activation of DNA damage checkpoints. Mutations in the Mre11 gene cause the human ataxia-telangiectasia-like disorder (ATDL). Here, we show that null mutations in the Drosophila mre11 and rad50 genes cause both telomeric fusion and chromosome breakage. Moreover, we demonstrate that these mutations are in the same epistasis group required for telomere capping and mitotic chromosome integrity. Using an antibody against Rad50, we show that this protein is uniformly distributed along mitotic chromosomes, and that Rad50 is unstable in the absence of its binding partner Mre11. To define the roles of rad50 and mre11 in telomere protection, mutant chromosome preparations were immunostained for both HP1 and HOAP, two proteins that protect Drosophila telomeres from fusion. Cytological analysis revealed that mutations in rad50 and mre11 drastically reduce accumulation of HOAP and HP1 at telomeres. This suggests that the MRN complex protects Drosophila telomeres by facilitating recruitment of HOAP and HP1 at chromosome ends.