Human telomerase reverse transcriptase (hTERT), the catalytic subunit of human telomerase, contains conserved motifs common to retroviral reverse transcriptases and telomerases. Within the C motif of hTERT is the Leu866-Val867-Asp868-Asp869 tetrapeptide that includes a catalytically essential aspartate dyad. Site-directed mutagenesis of Tyr183 and Met184 residues in HIV-1 RT, residues analogous to Leu866 and Val867, revealed that they are key determinants of nucleotide binding, processivity and fidelity. In this study, we show that substitutions at Val867 lead to significant changes in overall enzyme activity and telomere repeat extension rate, but have little effect on polymerase processivity. All Val867 substitutions examined (Ala, Met, Thr) led to reduced repeat extension rates, ranging from approximately 20 to 50% of the wild-type rate. Reconstitution of V867M hTERT and telomerase RNAs (TRs) with mutated template sequences revealed the effect on extension rate was associated with a template copying defect specific to template A residues. Furthermore, the Val867 hTERT mutants also displayed increased nucleotide incorporation fidelity, implicating Val867 as a determinant of telomerase fidelity. These findings suggest that by evolving to have a valine at position 867, the wild-type hTERT protein may have partially compromised polymerase fidelity for optimal and rapid repeat synthesis.