The appropriate regulation of telomere length homeostasis is crucial for the maintenance of genome integrity. The telomere-binding protein TZAP has been suggested to regulate telomere length by promoting t-circle and c-circle excisions through telomere trimming, yet the molecular mechanisms by which TZAP functions at telomeres are not understood. Using a system based on TZAP overexpression, we show that efficient TZAP recruitment to telomeres occurs in the context of open telomeric chromatin caused by loss of ATRX/DAXX independently of H3.3 deposition. Moreover, our data indicate that TZAP binding to telomeres induces telomere dysfunction and ALT-like activity, resulting in the generation of t-circles and c-circles in a Bloom-Topoisomerase IIIα-RMI1-RMI2 (BTR)-dependent manner.