Studies using human and mouse cells have revealed some changes to non-telomeric chromatin and gene expression in response to abnormally short telomeres. To investigate this further, we studied the effect of inheriting shorter telomeres on transcription and genetic stability at non-telomeric sites in the mouse. Using multiple generations of Terc knockout mice, we show that inheriting shorter telomeres from one parent increases the likelihood of transcriptional silencing at a non-telomeric green fluorescent protein (GFP) transgene inherited from the other parent. In these cases, silencing must occur at or after zygote formation. In grand-offspring from a G3 Terc (-/-) parent, transgene expression was further reduced and associated with increased DNA methylation and, surprisingly, reduced copy number at the transgene array. In these cases, the transgene had been passed through the germline of a Terc-compromised parent, providing an opportunity for meiotic events. Furthermore, genome-wide microarray analysis of copy number variations revealed greater genetic instability in G3 Terc (-/-) mice than detected in wild-type mice of the same genetic background. Our results have implications for the molecular mechanisms underlying premature-ageing syndromes, such as dyskeratosis congenita. In autosomal-dominant dyskeratosis congenita, progressive telomere shortening is seen as it passes down the generations, and this is associated with anticipation, i.e. the disease becomes more severe earlier. The underlying mechanism is not known, but has been considered to be simply associated with decreases in telomere length. Epigenetic and/or genetic changes at non-telomeric regions could, in theory, be involved.