Many tumors maintain chromosome-ends through a telomerase-independent, DNA-templated mechanism called alternative lengthening of telomeres (ALT). While ALT occurs in only a subset of tumors, it is strongly associated with mutations in the genes ATRX and DAXX, which encode components of an H3.3 histone chaperone complex. The role of ATRX and DAXX mutations in potentiating the mechanism of ALT remains incompletely understood. Here we characterize an osteosarcoma cell line, G292, with wild-type ATRX but a unique chromosome translocation resulting in loss of DAXX function. While ATRX and DAXX form a complex in G292, this complex fails to localize to nuclear PML bodies. We demonstrate that introduction of wild type DAXX suppresses the ALT phenotype and restores the localization of ATRX/DAXX to PML bodies. Using an inducible system, we show that ALT-associated PML bodies are disrupted rapidly following DAXX induction and that ALT is again restored following withdrawal of DAXX.