Telomerase is a reverse transcriptase specialized in telomere synthesis. The enzyme is primarily nuclear where it elongates telomeres, but many reports show that the catalytic component of telomerase (in humans called hTERT) also localizes outside of the nucleus, including in mitochondria. Shuttling of hTERT between nucleus and cytoplasm and vice versa has been reported, and different proteins shown to regulate such translocation. Exactly why telomerase moves between subcellular compartments is still unclear. In this study we report that mutations that disrupt the nuclear export signal (NES) of hTERT render it nuclear but unable to immortalize cells despite retention of catalytic activity in vitro. Overexpression of the mutant protein in primary fibroblasts is associated with telomere‐based cellular senescence, multinucleated cells and the activation of the DNA damage response genes ATM, Chk2 and p53. Mitochondria function is also impaired in the cells. We find that cells expressing the mutant hTERT produce high levels of mitochondrial reactive oxygen species and have damage in telomeric and extratelomeric DNA. Dysfunctional mitochondria are also observed in an ALT (alternative lengthening of telomeres) cell line that is insensitive to growth arrest induced by the mutant hTERT showing that mitochondrial impairment is not a consequence of the growth arrest. Our data indicate that mutations involving the NES of hTERT are associated with defects in telomere maintenance, mitochondrial function and cellular growth, and suggest targeting this region of hTERT as a potential new strategy for cancer treatment.