Retrotransposons can facilitate repair of broken chromosomes, and therefore an important question is whether the host can activate retrotransposons in response to chromosomal lesions. Here we show that Ty1 elements, which are LTR-retrotransposons in Saccharomyces cerevisiae, are mobilized when DNA lesions are created by the loss of telomere function. Inactivation of telomerase in yeast results in progressive shortening of telomeric DNA, eventually triggering a DNA-damage checkpoint that arrests cells in G2/M. A fraction of cells, termed survivors, recover from arrest by forming alternative telomere structures. When telomerase is inactivated, Ty1 retrotransposition increases substantially in parallel with telomere erosion and then partially declines when survivors emerge. Retrotransposition is stimulated at the level of Ty1 cDNA synthesis, causing cDNA levels to increase 20-fold or more before survivors form. This response is elicited through a signaling pathway that includes Rad24, Rad17, and Rad9, three components of the DNA-damage checkpoint. Our findings indicate that Ty1 retrotransposons are activated as part of the cellular response to telomere dysfunction.