The enzyme telomerase ensures the integrity of linear chromosomes by maintaining telomere length. As a hallmark of cancer, cell immortalization and unlimited proliferation is gained by reactivation of telomerase. However, a significant fraction of cancer cells instead uses alternative telomere lengthening mechanisms toensuretelomere function,collectively known asAlternative Lengthening ofTelomeres(ALT). Although the budding yeast Naumovozyma castellii (Saccharomyces castellii) has a proficient telomerase activity, we demonstrate here that telomeres in N. castellii are efficiently maintained by a novel ALT mechanism after telomerase knockout. Remarkably, telomerase-negative cells proliferate indefinitely without any major growth crisis and display wild-type colony morphology. Moreover, ALT cells maintain linear chromosomes and preserve a wild-type DNA organization at the chromosome termini, including a short stretch of terminal telomeric sequence. Notably, ALT telomeres are elongated by the addition of 275 bp repeats containing a short telomeric sequence and the subtelomeric DNA located just internally (TelKO element). Although telomeres may be elongated by several TelKO repeats, no dramatic genome-wide amplification occurs, thus indicating that the repeat addition may be regulated. Intriguingly, a short interstitial telomericsequence(ITS)functionsastheinitiationpointfortheadditionoftheTelKOelement.This implies that N. castellii telomeres are structurally predisposed to efficiently switch to the ALT mechanism as a response to telomerase dysfunction.