Mammalian shelterin proteins POT1 and TPP1 form a stable heterodimer that protects chromosome ends and regulates telomerase-mediated telomere extension. However, how POT1 interacts with TPP1 remains unknown. Here we present the crystal structure of the C-terminal portion of human POT1 (POT1C) complexed with the POT1-binding motif of TPP1. The structure shows that POT1C contains two domains, a third OB fold and a Holliday junction resolvase-like domain. Both domains are essential for binding to TPP1. Notably, unlike the heart-shaped structure of ciliated protozoan Oxytricha nova TEBPα-β complex, POT1-TPP1 adopts an elongated V-shaped conformation. In addition, we identify several missense mutations in human cancers that disrupt the POT1C-TPP1 interaction, resulting in POT1 instability. POT1C mutants that bind TPP1 localize to telomeres but fail to repress a DNA damage response and inappropriate repair by A-NHEJ. Our results reveal that POT1 C terminus is essential to prevent initiation of genome instability permissive for tumorigenesis.