The POT1 (protection of telomeres) protein binds the single-stranded G-rich overhang and is essential for both telomere end protection and telomere length regulation. Telomeric binding of POT1 is enhanced by its interaction with TPP1. In this study, we demonstrate that mouse Tpp1 confers telomere end protection by recruiting Pot1a and Pot1b to telomeres. Knockdown of Tpp1 elicits a p53-dependent growth arrest and an ATM-dependent DNA damage response at telomeres. In contrast to depletion of Trf2, which activates ATM, removal of Pot1a and Pot1b from telomeres initiates an ATR-dependent DNA damage response (DDR). Finally, we show that telomere dysfunction as a result of Tpp1 depletion promotes chromosomal instability and tumorigenesis in the absence of an ATM-dependent DDR. Our results uncover a novel ATR-dependent DDR at telomeres that is normally shielded by POT1 binding to the single-stranded G-overhang. In addition, our results suggest that loss of ATM can cooperate with dysfunctional telomeres to promote cellular transformation and tumor formation in vivo.