Mutation of the template region in the RNA component of telomerase can cause incorporation of mutant DNA sequences at telomeres. We made all 63 mutant sequence combinations at template positions 474-476 of the yeast telomerase RNA, TLC1. Mutants contained faithfully incorporated template mutations, as well as misincorporated sequences in telomeres, a phenotype not previously reported for Saccharomyces cerevisiae telomerase template mutants. Although growth rates and telomere profiles varied widely among the tlc1 mutants, chromosome separation and segregation were always aberrant. The mutants showed defects in sister chromatid separation at centromeres as well as telomeres, suggesting activation of a cell cycle checkpoint. Deletion of the DNA damage response genes DDC1, MEC3, or DDC2/SML1 failed to restore chromosome separation in the tlc1 template mutants. These results suggest that mutant telomere sequences elicit a checkpoint that is genetically distinct from those activated by deletion of telomerase or DNA damage.