Telomere-repeat-encoding RNA (referred to as TERRA) has been identified as a potential component of yeast and mammalian telomeres. We show here that TERRA RNA interacts with several telomere-associated proteins, including telomere repeat factors 1 (TRF1) and 2 (TRF2), subunits of the origin recognition complex (ORC), heterochromatin protein 1 (HP1), histone H3 trimethyl K9 (H3 K9me3), and members of the DNA-damage-sensing pathway. siRNA depletion of TERRA caused an increase in telomere dysfunction-induced foci, aberrations in metaphase telomeres, and a loss of histone H3 K9me3 and ORC at telomere repeat DNA. Previous studies found that TRF2 amino-terminal GAR domain recruited ORC to telomeres. We now show that TERRA RNA can interact directly with the TRF2 GAR and ORC1 to form a stable ternary complex. We conclude that TERRA facilitates TRF2 interaction with ORC and plays a central role in telomere structural maintenance and heterochromatin formation.