In Saccharomyces cerevisiae, the Ku heterodimer contributes to telomere maintenance as a component of telomeric chromatin and as an accessory subunit of telomerase. How Ku binding to double-stranded DNA (dsDNA) and to telomerase RNA (TLC1) promotes Ku's telomeric functions is incompletely understood. We demonstrate that deletions designed to constrict the DNA-binding ring of Ku80 disrupt nonhomologous end-joining (NHEJ), telomeric gene silencing, and telomere length maintenance, suggesting that these functions require Ku's DNA end-binding activity. Contrary to the current model, a mutant Ku with low affinity for dsDNA also loses affinity for TLC1 both in vitro and in vivo. Competition experiments reveal that wild-type Ku binds dsDNA and TLC1 mutually exclusively. Cells expressing the mutant Ku are deficient in nuclear accumulation of TLC1, as expected from the RNA-binding defect. These findings force reconsideration of the mechanisms by which Ku assists in recruiting telomerase to natural telomeres and broken chromosome ends. PAPERCLIP: