The mechanisms by which cells accurately distinguish between DNA double-strand break (DSB) ends and telomeric DNA ends remain poorly defined. Recent investigations have revealed intriguing interactions between DNA repair and telomeres. We were the first to report a requirement for the nonhomologous end-joining (NHEJ) protein DNA-dependent protein kinase (DNA-PK) in the effective end-capping of mammalian telomeres. Here, we report our continued characterization of uncapped (as opposed to shortened) dysfunctional telomeres in cells deficient for the catalytic subunit of DNA-PK (DNA-PKcs) and shed light on their consequence. We present evidence in support of our model that uncapped telomeres in this repair-deficient background are inappropriately detected and processed as DSBs and thus participate not only in spontaneous telomere-telomere fusion but, importantly, also in ionizing radiation-induced telomere-DSB fusion events. We show that phosphorylation of DNA-PKcs itself (Thr-2609 cluster) is a critical event for proper telomere end-processing and that ligase IV (NHEJ) is required for uncapped telomere fusion. We also find uncapped telomeres in cells from the BALB/c mouse, which harbors two single-nucleotide polymorphisms that result in reduced DNA-PKcs abundance and activity, most markedly in mammary tissue, and are both radiosensitive and susceptible to radiogenic mammary cancer. Our results suggest mechanistic links between uncapped/dysfunctional telomeres in DNA-PKcs-deficient backgrounds, radiation-induced instability, and breast cancer. These studies provide the first direct evidence of genetic susceptibility and environmental insult interactions leading to a unique and ongoing form of genomic instability capable of driving carcinogenesis.