The p68 DEAD box helicases comprise a widely conserved protein family involved in a large range of biological processes including transcription, splicing and translation. The genome of the ciliate Tetrahymena thermophile encodes two p68-like helicases, Drh1p and Lia2p. We show that DRH1 is essential for growth and completion of development. In growing cells, Drh1p is excluded from the nucleus and accumulates near cortical basal bodies. In contrast, during sexual reproduction, this protein localizes to meiotic micronuclei, initially in punctate foci in regions where centromeres and telomeres are known to reside and later in post-zygotic differentiating somatic macronuclei. Differentiation of the macronuclear genome involves extensive DNA rearrangements including fragmentation of the five pairs of germline-derived chromosomes into 180 chromosomal sub-fragments that are stabilized by de novo telomere deletion. In addition, thousands of internal eliminated sequences (IESs) are excised from loci dispersed throughout the genome. Strains with DRH1 deleted from the germline nuclei, which do not express the protein during post-zygotic development, fail to fragment the developing macronuclear chromosomes. IES excision still occurs in the absence of DRH1 zygotic expression; thus, Drh1p is the first protein found to be specifically required for chromosome breakage but not DNA elimination.