Telomere maintenance by telomerase is essential for continuous proliferation of human cells and is vital for the survival of stem cells and 90% of cancer cells. To compensate for telomeric DNA lost during DNA replication, telomerase processively adds GGTTAG repeats to chromosome ends by copying the template region within its RNA subunit. Between repeat additions, the RNA template must be recycled. How telomerase remains associated with substrate DNA during this critical translocation step remains unknown. Using a single-molecule telomerase activity assay utilizing high-resolution optical tweezers, we demonstrate that stable substrate DNA binding at an anchor site within telomerase facilitates the processive synthesis of telomeric repeats. The product DNA synthesized by telomerase can be recaptured by the anchor site or fold into G-quadruplex structures. Our results provide detailed mechanistic insights into telomerase catalysis, a process of critical importance in aging and cancer.