Structural maintenance of chromosomes flexible hinge domain-containing protein 1 (SMCHD1) has been implicated in X-chromosome inactivation, imprinting, and DNA damage repair, and mutations in SMCHD1 can cause facioscapulohumeral muscular dystrophy. More recently, SMCHD1 has also been identified as a component of telomeric chromatin. Here, we report that SMCHD1 is required for DNA damage signaling and non-homologous end joining (NHEJ) at unprotected telomeres. Co-depletion of SMCHD1 and the shelterin subunit TRF2 reduced telomeric 3'-overhang removal in time-course experiments, as well as the number of chromosome end fusions. SMCHD1-deficient cells displayed reduced ATM S1981 phosphorylation and diminished formation of gamma H2AX foci and of 53BP1-containing telomere dysfunction-induced foci (TIFs), indicating defects in DNA damage checkpoint signaling. Removal of TPP1 and subsequent activation of ATR signaling rescued telomere fusion events in TRF2-depleted SMCHD1 knockout cells. Together, these data indicate that SMCHD1 depletion reduces telomere fusions in TRF2-depleted cells due to defects in ATM-dependent checkpoint signaling and that SMCHD1 mediates DNA damage response activation upstream of ATM phosphorylation at uncapped telomeres.