Telomerase is an RNA-directed DNA polymerase, composed of RNA and protein subunits, that replicates the telomere ends of linear eukaryotic chromosomes. Using a genetic strategy described here, we identify the product of the EST2 gene, Est2p, as a subunit of telomerase in the yeast Saccharomyces cerevisiae. Est2p is required for enzyme catalysis, as mutations in EST2 were found to result in the absence of telomerase activity. Immunochemical experiments show that Est2p is an integral subunit of the telomerase enzyme. Critical catalytic residues present in RNA-directed DNA polymerases are conserved in Est2p; mutation of one such residue abolishes telomerase activity, suggesting a direct catalytic role for Est2p.