Loss of telomere integrity can have two outcomes with opposite predicted effects on tumorigenesis. On the one hand, shortened telomeres in normal cells may trigger cell cycle arrest, leading to tumor suppression. On the other hand, in a tumor cell in which neither the p53 nor pRb pathway is intact, shortened telomeres could initiate chromosome instability and promote tumorigenesis A major issue in telomere research is to understand how shortened dysfunctional telomeres can regulate the onset of cellular senescence. Recent studies have revealed that critically shortened or acutely uncapped telomeres share molecular features with damaged DNA. We have recently linked the phosphorylation and activation of one major DNA damage effector checkpoint kinase, Chk2, to telomere erosion in signalling cell cycle arrest in normal fibroblasts. Here, we discuss several hypotheses to explain the molecular events occurring at shortened telomeres that ultimately lead to cell cycle arrest or increased genomic instability.