The stem terminus element (STE), which was discovered 13 y ago in human telomerase RNA, is required for telomerase activity, yet its mode of action is unknown. We report that the Schizosaccharomyces pombe telomerase RNA, TER1 (telomerase RNA 1), also contains a STE, which is essential for telomere maintenance. Cells expressing a partial loss-of-function TER1 STE allele maintained short stable telomeres by a recombination-independent mechanism. Remarkably, the mutant telomere sequence was different from that of wild-type cells. Generation of the altered sequence is explained by reverse transcription into the template boundary element, demonstrating that the STE helps maintain template boundary element function. The altered telomeres bound less Pot1 (protection of telomeres 1) and Taz1 (telomere-associated in Schizosaccharomyces pombe 1) in vivo. Thus, the S. pombe STE, although distant from the template, ensures proper telomere sequence, which in turn promotes proper assembly of the shelterin complex.T he specialized reverse-transcriptase telomerase compensates for the inability of the conventional semiconservative replication machinery to copy the very end of the chromosome. In addition to solving this "end replication problem," telomeres perform other roles, such as protecting chromosomes from degradation and end-to-end fusions, a function that requires both telomeric DNA and telomere-associated proteins. In the fission yeast Schizosaccharomyces pombe, telomeric DNA is bound and protected by a six-protein complex that has many similarities to mammalian shelterin. S. pombe shelterin protects the telomere, inhibits nonhomologous end joining, facilitates telomere replication, and recruits telomerase (1-3).The shelterin complex binds both double-stranded (ds) telomeric DNA and the terminal single-stranded (ss) guanine-rich overhang, known as the G-tail (3). The ds region of S. pombe telomeres is bound by the Myb domain of the S. pombe shelterin component Taz1 (telomere-associated in Schizosaccharomyces pombe 1), whereas the G-tail is bound by the OB domains of Pot1 (protection of telomeres 1). Both the Myb and OB (oligonucleotide/oligosaccharidebinding) domains are present in the mammalian homologs of these proteins, TRF1/TRF2 and POT1, respectively (1-3).Although telomeric DNA almost always consists of short repeats, the fidelity of these repeats is not perfect in most organisms, including humans (4). In S. pombe, repeat heterogeneity is particularly high. Although the core S. pombe telomere repeat 5′-GGTTACA-3′ is incorporated at high levels, heterogeneity is created by the inclusion of 1-6 guanines before the core repeat and more rarely by the addition of a cytosine at the end of the repeat. These additions yield a telomere consensus sequence of 5′-(G) 0-6 GGTTACAC-3′ (rare cytosine is underlined throughout this paper). Almost half (42%) of the telomeric repeats are preceded by a guanine tract of 1-6 Gs, whereas the rare cytosine is present in ∼12% of the repeats (5). The (G) 1-6 tracts result from template stut...