Human telomeres are protected by TRF2. Inhibition of this telomeric protein results in partial loss of the telomeric 3' overhang and chromosome end fusions formed through nonhomologous end-joining (NHEJ). Here we report that ERCC1/XPF-deficient cells retained the telomeric overhang after TRF2 inhibition, identifying this nucleotide excision repair endonuclease as the culprit in overhang removal. Furthermore, these cells did not accumulate telomere fusions, suggesting that overhang processing is a prerequisite for NHEJ of telomeres. ERCC1/XPF was also identified as a component of the telomeric TRF2 complex. ERCC1/XPF-deficient mouse cells had a novel telomere phenotype, characterized by Telomeric DNA-containing Double Minute chromosomes (TDMs). We speculate that TDMs are formed through the recombination of telomeres with interstitial telomere-related sequences and that ERCC1/XPF functions to repress this process. Collectively, these data reveal an unanticipated involvement of the ERCC1/XPF NER endonuclease in the regulation of telomere integrity and establish that TRF2 prevents NHEJ at telomeres through protection of the telomeric overhang from ERCC1/XPF.