DNA:RNA hybrids, nucleic acid structures with diverse physiological functions, can disrupt genome integrity when dysregulated. Human telomeres were shown to form hybrids with the lncRNA TERRA, yet the formation and distribution of these hybrids among telomeres, their regulation and their cellular effects remain elusive. Here we predict and confirm in several human cell types that DNA:RNA hybrids form at many subtelomeric and telomeric regions. We demonstrate that ICF syndrome cells, which exhibit short telomeres and elevated TERRA levels, are enriched for hybrids at telomeric regions throughout the cell cycle. Telomeric hybrids are associated with high levels of DNA damage at chromosome ends in ICF cells, which are significantly reduced with overexpression of RNase H1. Our findings suggest that abnormally high TERRA levels in ICF syndrome lead to accumulation of telomeric hybrids that, in turn, can result in telomeric dysfunction.