Telomerase is a cellular reverse transcriptase that extends one strand (the G-strand) of the telomere terminal repeats. Aside from this role in telomere length maintenance, telomerase has been proposed to serve a protective function at chromosome ends, although this is not well understood mechanistically. Earlier analysis suggests that, in the pathogenic yeast Candida albicans, the catalytic reverse transcriptase subunit of telomerase (TERT/EST2) can protect telomeres against nucleolytic degradation. In this report we demonstrate that the RNA component (TER1) has a similar function; in addition to complete loss of telomerase activity and progressive telomere attrition, the ter1-DeltaDelta strains manifested a dramatic increase in the amount of G-strand overhangs, consistent with aberrant degradation of the complementary C-strand. We also demonstrate that a catalytically incompetent EST2 protein can suppress such overhang accumulation in the est2-DeltaDelta mutant to the same extent as the wild-type protein. Altogether, our data support the notion that the Candida telomerase core components mediate a protective function through a mechanism that is independent of its catalytic activity.