Telomerase is a ribonucleoprotein that catalyzes telomere elongation through the addition of TTAGGG repeats in humans. Activation of telomerase is often associated with immortalization of human cells and cancer. To dissect the human telomerase enzyme mechanism, we developed a functional in vitro reconstitution assay. After removal of the essential 445 nucleotide human telomerase RNA (hTR) by micrococcal nuclease digestion of partially purified human telomerase, the addition of in vitro transcribed hTR reconstituted telomerase activity. The activity was dependent upon and specific to hTR. Using this assay, truncations at the 5' and 3' ends of hTR identified a functional region of hTR, similar in size to the full-length telomerase RNAs from ciliates. This region is located between positions 1-203. Furthermore, we found that residues 1-44, 5' to the template region (residues 46-56) are not essential for activity, indicating a minimal functional region is located between residues 44-203. Mutagenesis of full-length hTR between residues 170-179, 180-189 or 190-199 almost completely abolished the ability of the hTR to function in the reconstitution of telomerase activity, suggesting that sequences or structures within this 30 nucleotide region are required for activity, perhaps by binding telomerase protein components.