Telomerase is an enzyme that adds repetitive DNA sequences to the ends of chromosomes and consists of two main subunits: the telomerase reverse transcriptase (TERT) protein and an associated telomerase RNA (TER). The telomerase essential N-terminal (TEN) domain is a conserved region of TERT proposed to mediate DNA substrate interactions. Here, we have employed single molecule telomerase binding assays to investigate the function of the TEN domain. Our results reveal telomeric DNA substrates bound to telomerase exhibit a dynamic equilibrium between two states: a docked conformation and an alternative conformation. The relative stabilities of the docked and alternative states correlate with the number of basepairs that can be formed between the DNA substrate and the RNA template, with more basepairing favoring the docked state. The docked state is further buttressed by the TEN domain and mutations within the TEN domain substantially alter the DNA substrate structural equilibrium. We propose a model in which the TEN domain stabilizes short RNA-DNA duplexes in the active site of the enzyme, promoting the docked state to augment telomerase processivity.