The physical ends of chromosomes, known as telomeres, protect chromosome ends from nucleolytic degradation and DNA repair activities. Conventional DNA replication enzymes lack the ability to fully replicate telomere ends. In addition, nucleolytic activities contribute to telomere erosion. Short telomeres trigger DNA damage checkpoints, which mediate cellular senescence. Telomere length homeostasis requires telomerase, a cellular reverse transcriptase, which uses an internal RNA moiety as a template for the synthesis of telomere repeats. Telomerase elongates the 3′ ends of chromosomes, whereas the complementary strand is filled in by conventional DNA polymerases. In humans, telomerase is ubiquitously expressed only during the first weeks of embryogenesis, and is subsequently downregulated in most cell types. Correct telomere length setting is crucial for long-term survival. The telomere length reserve must be sufficient to avoid premature cellular senescence and the acceleration of age-related disease. On the other side, telomere shortening suppresses tumor formation through limiting the replicative potential of cells. In recent years, novel insight into the regulation of telomerase at chromosome ends has increased our understanding on how telomere length homeostasis in telomerase-positive cells is achieved. Factors that recruit telomerase to telomeres in a cell cycle-dependent manner have been identified in Saccharomyces cerevisiae. In humans, telomerase assembles with telomeres during S phase of the cell cycle. Presumably through mediating formation of alternative telomere structures, telomere-binding proteins regulate telomerase activity in cis to favor preferential elongation of the shortest telomeres. Phosphoinositide 3-kinase related kinases are also required for telomerase activation at chromosome ends, at least in budding and fission yeast. In vivo analysis of telomere elongation kinetics shows that telomerase does not act on every telomere in each cell cycle but that it exhibits an increasing preference for telomeres as their lengths decline. This suggests a model in which telomeres switch between extendible and nonextendible states in a length-dependent manner. In this review we expand this model to incorporate the finding that telomerase levels also limit telomere length and we propose a second switch between a non-telomerase-associated “extendible” and a telomerase-associated “extending” state.