Ectopically expressed hTERT enables p16(INK4A)(-) human mammary epithelial cells to proliferate in the absence of growth factors, a finding that has led to the hypothesis that hTERT has growth regulatory properties independent of its role in telomere maintenance. We now show that telomerase can alter the growth properties of cells indirectly through its role in telomere maintenance, without altering growth stimulatory pathways. We find that telomere dysfunction, indicated by 53BP1/phosphorylated histone H2AX foci at chromosome ends, is present in robustly proliferating human mammary epithelial cells long before senescence. These foci correlate with increased levels of active p53. Ectopic expression of hTERT reduces the number of foci and the level of active p53, thereby decreasing sensitivity to growth factor depletion, which independently activates p53. The continuous presence of hTERT is not necessary for this effect, indicating that telomere maintenance, rather than the presence of the enzyme itself, is responsible for the increased ability to proliferate in the absence of growth factors. Our findings provide a previously unrecognized mechanistic explanation for the observation that ectopically expressed hTERT conveys growth advantages to cells, without having to postulate nontelomeric functions for the enzyme.