The telomerase reverse transcriptase adds de novo DNA repeats to chromosome termini. Here we define Caenorhabditis elegans MRT-1 as a novel factor required for telomerase-mediated telomere replication and the DNA-damage response. MRT-1 is composed of an N-terminal domain homologous to the second OB-fold of POT1 telomere-binding proteins and a C-terminal SNM1 family nuclease domain, which confer single-strand DNA-binding and processive 3'-to-5' exonuclease activity, respectively. Furthermore, telomerase activity in vivo depends on a functional MRT-1 OB-fold. We show that MRT-1 acts in the same telomere replication pathway as telomerase and the 9-1-1 DNA-damage response complex. MRT-1 is dispensable for DNA double-strand break repair, but functions with the 9-1-1 complex to promote DNA interstrand cross-link (ICL) repair. Our data reveal MRT-1 as a dual-domain protein required for telomerase function and ICL repair, which raises the possibility that telomeres and ICL lesions may share a common feature that plays a critical role in de novo telomere repeat addition.