Telomeres are highly specialized structures at the ends of chromosomes that are made up of tandem 5'-TTAGGG-3' repeats and a number of telomere associated proteins. By forming loop structures, the very end of a telomere is concealed and distinguished from a DNA break, thus protecting chromosomes from end-to-end fusions, misrepair and degradation. Telomere length is maintained by an enzyme called telomerase which is very weak or undetectable in most normal human somatic cells. In telomerase-negative cells, telomeric DNA is progressively lost with cell divisions until the cells undergo replicative senescence, which serves as an intrinsic mechanism to prevent normal somatic cells from replicating indefinitely. In checkpoint defective cells, telomere dysfunction resulting from excessive telomere attrition or disruption of telomere structure may initiate chromosomal instability through end-to-end fusion of unprotected chromosomes. Through propagation of breakage-fusion-bridge (BFB) cycles, genetic aberrations characteristic of cancers, including aneuploidy, loss of heterozygosity, gene amplification and gene loss can be generated. In vitro, cells with extensive chromosomal instability succumb to crisis which is characterized by wide-spread cell death. It has been reported that cells surviving crisis either have activated telomerase, or use an alternative telomere lengthening (ALT) mechanism to stabilize the existing telomeres and alleviate chromosome instability. The immortalized post-crisis cells have the potential to acquire additional genetic alterations for malignant transformation. In this review, we summarize our knowledge on the association between telomere dysfunction, genomic instability and cancer development.