In budding yeast, Cdc13, Stn1, and Ten1 form the telomere-binding heterotrimer CST complex. Here we investigate the role of Cdc13/CST in maintaining genome stability by using a Chr VII disome system that can generate recombinants, chromosome loss, and enigmatic unstable chromosomes. In cells expressing a temperature sensitive CDC13 allele, cdc13 F684S , unstable chromosomes frequently arise from problems in or near a telomere. We found that, when Cdc13 is defective, passage through S phase causes Exo1-dependent ssDNA and unstable chromosomes that are then the source for additional chromosome instability events (e.g. recombinants, chromosome truncations, dicentrics, and/or chromosome loss). We observed that genome instability arises from a defect in Cdc13's function during DNA replication, not Cdc13's putative post-replication telomere capping function. The molecular nature of the initial unstable chromosomes formed by a Cdc13-defect involves ssDNA and does not involve homologous recombination nor non-homologous end joining; we speculate the original unstable chromosome may be a one-ended double strand break. This system defines a link between Cdc13's function during DNA replication and genome stability in the form of unstable chromosomes, that then progress to form other chromosome changes.