TElomeric Repeat-containing RNA are long non-coding RNAs generated from the telomeres. TERRAs are essential for the establishment of heterochromatin marks at telomeres, which serve for the binding of Heterochromatin Protein 1 (HP1), a protein family of epigenetic modifiers involved with chromatin compaction and gene silencing. While HP1γ is enriched on gene bodies of actively transcribed human and mouse genes, it is unclear if its transcriptional role is important for HP1γ function in telomere cohesion and telomere maintenance. We aimed to study the effect of mouse HP1γ on the transcription of telomere factors and molecules that can affect telomere maintenance. We investigated the telomere function of HP1γ by using deficient mouse embryonic fibroblasts (MEFs) deriving from 13.5 embryonic day embryos compared to their litter mate controls. We used gene expression analysis of HP1γ deficient MEFs and validated the molecular and mechanistic consequences of HP1γ loss by telomere FISH, immunofluorescence, RT-qPCR and DNA-RNA Immunoprecipitation (DRIP). Loss of HP1γ in primary MEFs leads to a downregulation of various telomere and telomere-accessory transcripts, including shelterin protein TRF1. Its downregulation is associated with increased telomere replication stress and DNA damage (γH2AX), effects more profound in females. We suggest that the source for the impaired telomere maintenance is a consequence of increased telomeric DNA-RNA hybrids and TERRAs arising at and from mouse chromosomes 18 and X. Our results suggest an important transcriptional control by mouse HP1γ of various telomere factors including TRF1 protein and TERRAs that has profound consequences on telomere stability, with a potential sexually dimorphic nature.