SummaryTelomere attrition is linked to cancer, diabetes, cardiovascular disease and aging. This is because telomere losses trigger further genomic modifications, culminating with loss of cell function and malignant transformation. However, factors regulating the transition from cells with short telomeres, to cells with profoundly altered genomes, are little understood. Here, we use budding yeast engineered to lack telomerase and other forms of telomere maintenance, to screen for such factors. We show that initially, different DNA damage checkpoint proteins act together with Exo1 and Mre11 nucleases, to inhibit proliferation of cells undergoing telomere attrition. However, this situation changes when survivors lacking telomeres emerge. Intriguingly, checkpoint pathways become tolerant to loss of telomeres in survivors, yet still alert to new DNA damage. We show that Rif1 is responsible for the checkpoint tolerance and proliferation of these survivors, and that is also important for proliferation of cells with a broken chromosome. In contrast, Exo1 drives extensive genomic modifications in survivors. Thus, the conserved proteins Rif1 and Exo1 are critical for survival and evolution of cells with lost telomeres.