Unusual chromatin structures underlie epigenetic effects at the silent mating-type loci and telomeres in yeast. Many of the same genes appear to function in transcriptional silencing observed at both the silent mating-type loci and at telomeres. The observation that these loci are united by a requirement for shared factors suggests that the structure of chromatin at these regions is similar. Alteration of telomeric chromatin components affects regulation of transcription, telomeric length, recombination and chromosomal stability. Mutations in TLC1 and EST2, which both encode components of telomerase, cause identical phenotypes: progressive shortening of telomeric DNA, increased chromosome loss and eventually cell death. In this review, we examine the relationship between telomeric chromatin and telomere replication and discuss the possibility that telomerase itself is an integral part of telomeric chromatin structure.