It is well established that the template for telomeric DNA synthesis is provided by the RNA subunit of telomerase; however, the additional functions provided by most of the rest of the RNA (>1000 nucleotides in budding yeast) are largely unknown. By alignment of telomerase RNAs of Saccharomyces cerevisiae and six Kluyveromyces species followed by mutagenesis of the S. cerevisiae RNA, we found a conserved region that is essential for telomere maintenance. Phylogenetic analysis and computer folding revealed that this region is conserved not only in primary nucleotide sequence but also in secondary structure. A common bulged-stem structure was predicted in all seven yeast species. Mutational analysis showed the structure to be essential for telomerase function. Suppression of bulged-stem mutant phenotypes by overexpression of Est1p and loss of co-immunoprecipitation of the mutant RNAs with Est1p indicated that this bulged stem is necessary for association of Est1p, a telomerase regulatory subunit. Est1p in yeast extract bound specifically to a small RNA containing the bulged stem, suggesting a direct interaction. We propose that this RNA structure links the enzymatic core of telomerase with Est1p, thereby allowing Est1p to recruit or activate telomerase at the telomere.