Mutations in the yeast Saccharomyces cerevisiae PIF1 gene, which encodes a 5'-to-3' DNA helicase, cause telomere lengthening and a large increase in the formation rate of new telomeres. Here, we show that Pif1p acts by inhibiting telomerase rather than telomere-telomere recombination, and this inhibition requires the helicase activity of Pif1p. Overexpression of enzymatically active Pif1p causes telomere shortening. Thus, Pif1p is a catalytic inhibitor of telomerase-mediated telomere lengthening. Because Pif1p is associated with telomeric DNA in vivo, its effects on telomeres are likely direct. Pif1p-like helicases are found in diverse organisms, including humans. We propose that Pif1p-mediated inhibition of telomerase promotes genetic stability by suppressing telomerase-mediated healing of double-strand breaks.