Telomeres, specialized domains assembled at the ends of linear chromosomes, are essential for genomic stability in eukaryotes. The formation and maintenance of telomeres are governed by numerous factors such as telomeric repeats, telomere-binding proteins, heterochromatin proteins, and telomerase. Here, we report Sde2, a novel nuclear protein essential for telomeric silencing and genomic stability in the fission yeast Schizosaccharomyces pombe. A deficiency in sde2 results in the derepression of the ura4(+) gene inserted near telomeric repeats, and the noncoding transcripts from telomeric regions accumulate in sde2 Delta cells. The loss of Sde2 function compromises transcriptional silencing at telomeres, and this silencing defect is accompanied by increased levels of acetylated histone H3K14 and RNA polymerase II occupancy at telomeres as well as reduced recruitment of the SNF2 ATPase/histone deacetylase-containing complex SHREC to telomeres. Deletion of sde2 also leads to a higher frequency of mitotic minichromosome loss, and sde2 Delta cells often form asci that contain spores in abnormal numbers, shapes, or both. In addition, sde2 Delta cells are highly sensitive to several stresses, including high/low temperatures, bleomycin, which induces DNA damage, and thiabendazole, a microtubule-destabilizing agent. Furthermore, Sde2 genetically interacts with the telomere regulators Taz1, Pof3, and Ccq1. These findings demonstrate that Sde2 cooperates with other telomere regulators to maintain functional telomeres, thereby preventing genomic instability. (C) 2011 Elsevier Inc. All rights reserved.