Telomerase is the cellular RNA-dependent DNA polymerase (i.e. reverse transcriptase) that uses an integral RNA template to synthesize telomeric DNA repeats at the ends of linear chromosomes. Human telomerase RNA (hTERC) is thought to function as a dimeric complex consisting of two RNAs that interact with each other physically as well as genetically. We show here for the first time that the yeast Saccharomyces cerevisiae telomerase RNA TLC1 likewise forms dimers in vitro. TLC1 dimerization depends on a unique 6-base self-complementary sequence, which closely mimics palindromic sequences that mediate functional dimerization of HIV-1 and other retroviral genomes. We found that dissimilar but comparably located TLC1 palindromes from other sensu stricto yeasts can functionally substitute for that of S. cerevisiae. Yeast cells expressing dimerization-defective TLC1 alleles have shorter telomeres than those with wild-type TLC1. This study, therefore, highlights dimerization as a functionally conserved feature of the RNA templates utilized by reverse transcriptases of both viral and cellular origins.