POT1 (protection of telomere 1) is a highly conserved single-stranded telomeric binding protein that is essential for telomere end protection. Here, we report the cloning and characterization of a second member of the mouse POT family. POT1b binds telomeric DNA via conserved DNA binding oligonucleotide/oligosaccharide (OB) folds. Compared to POT1a, POT1b OB-folds possess less sequence specificity for telomeres. In contrast to POT1a, truncated POT1b possessing only the OB-folds can efficiently localize to telomeres in vivo. Overexpression of a mutant Pot1b allele that cannot bind telomeric DNA initiated a DNA damage response at telomeres that led to p53-dependent senescence. Furthermore, a reduction of the 3′ G-rich overhang, increased chromosomal fusions and elevated homologous recombination (HR) were observed at telomeres. shRNA mediated depletion of endogenous Pot1b in Pot1a deficient cells resulted in increased chromosomal aberrations. Our results indicate that POT1b plays important protective functions at telomeres and that proper maintenance of chromosomal stability requires both POT proteins.