Cellular DNA is organized into chromosomes and capped by a unique nucleoprotein structure, the telomere. Both oxidative stress and telomere shortening/dysfunction cause aging-related degenerative pathologies and increase cancer risk. However, a direct connection between oxidative damage to telomeric DNA, comprising <1% of the genome, and telomere dysfunction has not been established. By fusing the KillerRed chromophore with the telomere repeat binding factor 1, TRF1, we developed a novel approach to generate localized damage to telomere DNA and to monitor the real time damage response at the single telomere level. We found that DNA damage at long telomeres in U2OS cells is not repaired efficiently compared to DNA damage in non-telomeric regions of the same length in heterochromatin. Telomeric DNA damage shortens the average length of telomeres and leads to cell senescence in HeLa cells and cell death in HeLa, U2OS and IMR90 cells, when DNA damage at non-telomeric regions is undetectable. Telomere-specific damage induces chromosomal aberrations, including chromatid telomere loss and telomere associations, distinct from the damage induced by ionizing irradiation. Taken together, our results demonstrate that oxidative damage induces telomere dysfunction and underline the importance of maintaining telomere integrity upon oxidative damage.