The hallmarks of telomere dysfunction in mammals are reduced telomeric 3′ overhangs, telomere fusions, and cell cycle arrest due to a DNA damage response. Here, we report on the phenotypes of RNAi‐mediated inhibition of POT1, the single‐stranded telomeric DNA‐binding protein. A 10‐fold reduction in POT1 protein in tumor cells induced neither telomere fusions nor cell cycle arrest. However, the 3′ overhang DNA was reduced and all telomeres elicited a transient DNA damage response in G1, indicating that extensive telomere damage can occur without cell cycle arrest or telomere fusions. RNAi to POT1 also revealed its role in generating the correct sequence at chromosome ends. The recessed 5′ end of the telomere, which normally ends on the sequence ATC‐5′, was changed to a random position within the AATCCC repeat. Thus, POT1 determines the structure of the 3′ and 5′ ends of human chromosomes, and its inhibition generates a novel combination of telomere dysfunction phenotypes in which chromosome ends behave transiently as sites of DNA damage, yet remain protected from nonhomologous end‐joining.