Telomerase is a multisubunit enzyme that maintains genome stability through its role in telomere replication. Although the Est3 protein is long recognized as an essential telomerase component, how it associates with and functions in the telomerase complex has remained enigmatic. Here we provide the first evidence of a direct interaction between Saccharomyces cerevisiae Est3p and the catalytic protein subunit (Est2p) by demonstrating that recombinant Est3p binds the purified telomerase essential N-terminal (TEN) domain of Est2p in vitro. Mutations in a small cluster of amino acids predicted to lie on the surface of Est3p disrupt this interaction with Est2p, reduce assembly of Est3p with telomerase in vivo, and cause telomere shortening and senescence. We also show that recombinant Est3p stimulates telomerase activity above basal levels in vitro in a manner dependent on the Est2p TEN domain interaction. Together, these results define a direct binding interaction between Est3p and Est2p and reconcile the effect of S. cerevisiae Est3p with previous experiments showing that Est3p homologs in related yeast species influence telomerase activity. Additionally, it contributes functional support to the idea that Est3p is structurally related to the mammalian shelterin protein, TPP1, which also influences telomerase activity through interaction with the Est2p homolog, TERT.Telomeres are protein-DNA complexes that protect chromosome termini from nucleolytic digestion and distinguish natural chromosome ends from internal DNA breaks. Although the majority of telomeric DNA is double stranded, the G/T-rich strand forms a protruding 3Ј-overhang. In the absence of a counteracting mechanism, telomeres shorten during each cell division, ultimately activating cell cycle checkpoints and cellular senescence (1). If these checkpoints are disrupted or bypassed, end-to-end fusions and bridge breakage cycles can ensue. Telomerase, a ribonucleoprotein complex, promotes telomere maintenance and genomic stability by elongating the 3Ј-overhang by reverse transcription (2).In budding yeast, telomerase consists minimally of four dedicated subunits: TLC1 RNA, the template RNA (3); Est1p, an accessory protein important for recruiting and activating telomerase at the telomere (4, 5); Est2p, the reverse transcriptase (2); and Est3p, an additional accessory protein necessary for proper activity in vivo (6). Deletion of any of these components eliminates telomerase function in vivo, yielding the Ever Shorter Telomere (EST) 4 phenotype (3,7,8). Although these and other telomerase components have been known for well over a decade, few details of their assembly into the ribonucleoprotein complex are understood. Described interactions are largely confined to protein associations with the RNA template. Est1p and Est2p independently bind distinct regions within the central portion of TLC1 RNA (9 -11). Sm proteins facilitate RNA stability through interaction with a site near the 3Ј-end of the RNA (12), and association of the catalytic core of telomerase wit...