Human telomeres associate with shelterin, a six-protein complex that protects chromosome ends from being recognized as sites of DNA damage. The shelterin subunit TRF2 (telomeric repeat-binding factor 2) protects telomeres by facilitating their organization into the protective capping structure. We have reported previously that the DNA-PKcs (DNA-dependent protein kinase catalytic subunit)-interacting protein KIP associates with telomerase through an interaction with hTERT (human telomerase reverse transcriptase). In the present study, we identify KIP as a novel interacting partner of TRF2. KIP is able to interact with both TRF2 and DNA-PKcs at telomeres. Because KIP is required for the association between TRF2 and DNA-PKcs, the interplay of these three proteins may provide a mechanism for the recruitment of DNA-PKcs to telomeres. We also show that KIP binding to TRF2 enhances the telomere-binding activity of TRF2, suggesting that KIP acts as a positive regulator of TRF2 function. Furthermore, depletion of KIP induces DNA-damage response foci at telomeres, thereby leading to induction of growth arrest, cellular senescence and altered cell cycle distribution. Collectively, our findings suggest that KIP, in addition to its association with catalytically active telomerase, plays important roles in the maintenance of functional telomeres and the regulation of telomere-associated DNA-damage response. Thus KIP represents a new pathway for modulating telomerase and telomere function in cancer.