Werner syndrome (WS) is a rare human premature aging disease caused by mutations in the gene encoding the RecQ helicase WRN. In addition to the aging features, this disorder is marked by genomic instability, associated with an elevated incidence of cancer. Several lines of evidence suggest that telomere dysfunction is associated with the aging phenotype of the syndrome; however, the origin of the genomic instability observed in WS cells and the reason for the high incidence of cancer in WS have not been established. We previously proposed that WRN helicase activity was necessary to prevent dramatic telomere loss during DNA replication. Here we demonstrate that replication-associated telomere loss is responsible for the chromosome fusions found in WS fibroblasts. Moreover, using metaphase analysis we show that telomere elongation by telomerase can significantly reduce the appearance of new chromosomal aberrations in cells lacking WRN, similar to complementation of WS cells with WRN. Our results suggest that the genome instability in WS cells depends directly on telomere dysfunction, linking chromosome end maintenance to chromosomal aberrations in this disease.